Lions Gate likely to nominate its largest shareholder to board

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Lions Gate Entertainment shareholder and director Mark Amin has sold three-quarters of his stake in the company, a likely precursor to his not being nominated for re-election to the board this fall. That could pave the way for Lions Gate to nominate its largest shareholder, Mark Rachesky, who owns nearly 20% of the stock.

In an interview, Amin says he sold 650,000 of his total 830,000 shares since last Thursday for ‘personal reasons’ related to other financial pressures. ‘The October stock crash cut my liquidity to half and triggered a lot of my personal loan covenants,’ he says.

Amin, who gained a board seat in 2000 after selling his production company Trimark Pictures to the Santa Monica-based studio, said he had not yet decided if he will seek re-election to the board. But earlier this year, his shares dipped below the level that requires Lions Gate to nominate him as one of its four U.S. directors (the others are company chiefs Jon Feltheimer and Michael Burns, plus former NASDQ CEO Hardwick Simmons) to its 12-member board, which also includes eight Canadian directors.

People close to the matter say Lions Gate plans to nominate Rachesky to fill Amin’s seat. Last week, activist shareholder Carl Icahn, who has been tightening his grip on Lions Gate and also been seeking board seats, revealed in filings with the SEC that he had boosted his stake to 15.6% from 14.5% over the last month, becoming the company’s largest shareholder behind Rachesky.

Rachesky, a New York investor, used to work for Icahn. But unlike his former boss, who has been critical of Lions Gate management, Rachesky has publicly supported Feltheimer and Burns.

In a mid-March regulatory filing, Rachesky whose New York-based MHR Fund Management LLC owns 19.9% of Lions Gate, changed his status to ‘active’ from ‘passive’ investor and said he may seek a board seat.

Icahn had been in negotiations with Lions Gate for board seats but those talks broke down earlier this year over, among other things, Lions Gate’s refusal to grant him assurances that a standstill agreement would be applied to other shareholders seeking board seats.

Lions Gate has been girding for a potential proxy contest with Icahn. Given his continued moves to gain more control of the company, it’s possible that Icahn will nominate his own slate of directors prior to the company’s annual shareholders meeting in mid-September. But, if he wants those nominees to be included in the Lions Gate proxy that will be circulated to shareholders, he must act promptly.

However, that does not preclude Icahn from circulating on his own a slate at any time up to the day of the meeting.

Lions Gate is expected to announce shortly its directors slate for the board.

Icahn has criticized Feltheimer and Burns for, in his view, spending too much money on operations and for the recent acquisition of TV Guide Network and TVGuide.com. Lions Gate, in a move to shore up its balance sheet, recently sold 49% of the cable channel and Internet site to a private equity arm of JPMorgan Chase for $123 million.

Last week, Lions Gate reported a $163-million net loss for its fiscal year ended March 31 due to soft showings of its films in the second and third quarters. Despite a strong run at the box office in the fourth quarter with ‘Tyler Perry’s Madea Goes To Jail,’ ‘My Bloody Valentine’ and ‘The Haunting In Connecticut,’ Lions Gate reported a loss of $28.6 million on revenue of $463.2 million.

-- Claudia Eller