As Icahn gains ownership, Lions Gate serves up another poison pill

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Under siege from Carl Icahn, Lions Gate Entertainment has adopted a so-called poison pill designed to prevent the activist shareholder from taking control of the Santa Monica studio.

The board of directors of the company behind the ‘Saw’ movies and cable TV show ‘Mad Men’ adopted the plan Thursday, one day after Icahn’s $7-per-share tender offer expired, and several hours after the investor acquired more shares on the open market that put his stake at 37.9%.

The pill, which is clearly aimed at Icahn, would prevent any individual from owning more than 38% of Lions Gate stock by issuing more stock to other shareholders. The second largest shareholder, Mark Rachesky, owns just under 20%.

It’s not the first time Lions Gate has tried to block Icahn with a poison pill provision. A previous poison pill adopted by the board that would have kept the hostile investor under 20% was voided in April by regulatory authorities in Canada, where the company is legally domiciled.


Icahn, who could not be reached for comment, could issue a legal challenge like the one he successfully mounted against the first pill. Lions Gate’s board believes the new pill will pass muster because, unlike the previous one, it has not been adopted in the context of an active tender offer.

Instead, the new pill is designed to block Icahn from purchasing more shares through private market transactions. Icahn told Bloomberg on Thursday that he can’t acquire more Lions Gate stock on the open market because of Canadian securities law restrictions.

In addition, if Icahn launches a new tender offer to try and take control of the company, the poison pill would require that a majority of other shareholders support his move. Currently, a majority of Lions Gate’s stock not controlled by Icahn is in the hands of management and shareholders supportive of them.

Lions Gate management is currently in discussions with near-bankrupt studio Metro-Goldwyn-Mayer about a possible merger, which would require Icahn’s consent to go forward.

Icahn, meanwhile, is preparing a slate of candidates to replace Lions Gate’s current board of directors in a proxy fight being planned for the company’s next annual meeting.

-- Ben Fritz


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