Court dismisses Lions Gate’s attempted ‘poison pill’ to block takeover

Lions Gate Entertainment’s plan to poison Carl Icahn’s attempted hostile takeover of the Santa Monica film and television studio has been given the death knell by a Canadian court.

The British Columbia Court of Appeal on Friday dismissed Lions Gate’s attempt to reinstate a “poison pill” that would have prevented activist investor Icahn from acquiring the company, best known for Tyler Perry films and the cable series “Mad Men.” The poison pill was annulled by a provincial regulatory body two weeks ago.

Although it’s headquartered in Santa Monica, Lions Gate is legally domiciled in Vancouver, giving authorities there jurisdiction.

The ruling is a blow to the company, which has been fighting Icahn’s hostile-takeover attempt for the last two months. The investor’s $7 per share tender offer, which values Lions Gate at $825 million, expires Monday night.

The proposed poison pill, which has yet to be approved by shareholders, would have prevented Icahn from raising his stake to more than 20%.

In a statement, Lions Gate said that it disagreed with the court’s decision and that it “continues to evaluate all of its alternatives.”

The only move left for Lions Gate is to petition the British Columbia Securities Commission to reconsider its April 27 decision voiding the poison pill. The company still plans to hold a shareholder vote on the pill Wednesday in hopes that a favorable vote would boost its petition.

For the moment, however, the dismissal of Lions Gate’s appeal could be a help to Icahn. Just hours before the original tender offer was to expire on April 30, he had garnered less than 6% of the studio’s shares. At the last minute, he delayed the expiration date to Monday, betting that a decision in his favor by the appeal court would sway more investors his way.

Icahn’s offer is contingent on him accumulating enough shares to control more than 50% of the company, after which he has said he would replace top management and cut costs.

That will be a tough goal to achieve since major shareholders who own more than 36% of the company have publicly said they won’t accept Icahn’s offer. However, if Icahn attracts a substantial number of shares, he could use that as ammunition to raise his bid, lower the threshold of ownership he needs to reach, or pressure management into a settlement giving him several seats on the board of directors.

Lions Gate stock closed down 2% on Friday at $6.68.

ben.fritz@latimes.com