Carl Icahn and Lions Gate now poised for proxy war

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The next few months are sure to grow increasingly ugly between Lions Gate and Carl Icahn, who is now the largest shareholder in the film and television studio.

Icahn confirmed early Thursday that he had purchased 15.6-million shares of Lions Gate for $7 per share in cash (amounting to about $109.2 million) as his tender offer expired, giving him a 31.8% stake in the company.

‘We are pleased with the results of our tender offer,’ Icahn said in a prepared statement.

Between now and June 30, Icahn may gain more shares as other stakeholders have the opportunity to tender their shares. After that, Icahn has said he will begin a proxy contest to take control of Lions Gate‘s board of directors by putting up a slate of candidates.


If Icahn’s ownership stake reaches 33%, he will have the power to veto any mergers or acquisitions -- potentially hampering management’s ability to move forward on certain business transactions. Also, that threshold would trigger a change-of-control clause in the employment contracts of top Lions Gate managers, including Chief Executive Jon Feltheimer and Vice Chairman Michael Burns, who could elect to leave the company with multimillion-dollar payouts. The two executives, however, are expected to stay at Lions Gate and fight for the company that they have built over the past decade.

More immediately, Lions Gate must deal with obtaining a waiver from its lead bank, JPMorgan Chase, since Icahn’s increased ownership stake could trigger a default in its credit facilities, which would accelerate immediate payback of its debt.

Lions Gate reiterated Thursday morning in a statement that it was in ‘advanced discussions’ with its lenders to finalize a waiver or amendment that would prevent the potential default.

Icahn continued to say that Lions Gate had ‘made no mention of its plans to deal with possible defaults under its bond indebtedness.’

Despite the developments, Lions Gate said it remained confident that Icahn ‘will not obtain control’ and urged shareholders to continue rejecting his ‘inadequate offer’ by not tendering their shares over the next 14 days.

It is unclear at this point whether Icahn or Lions Gate will call a special early shareholders meeting to vote on their respective slates. In recent years, the company’s annual shareholders gathering has taken place in September.

-- Claudia Eller