Lions Gate, Icahn begin settlement talks
Lions Gate Entertainment and activist investor Carl Icahn have begun settlement talks to end their long-running fight for control of the company.
In a filing with the Securities and Exchange Commission on Monday, the Santa Monica movie and TV studio acknowledged for the first time that it is in discussions with Icahn and may soon begin formal negotiations. Icahn has put a specific proposal on the table, which will be considered by a special committee of the Lions Gate board of directors, people familiar with the matter said.
“The board believes that it would now be appropriate to respond to the Icahn Group’s recent communications to determine whether there may be a basis on which to engage in negotiations,” Lions Gate said in the filing.
The disclosure comes days before Icahn’s $7-per-share hostile offer to take control of the company is set to expire Friday. Icahn has extended the expiration date twice after fewer than 6.5% of shareholders tendered their shares.
Lions Gate’s efforts to enact a so-called poison pill that would block Icahn’s takeover attempt was recently voided by authorities in Canada, where the company is incorporated. In a subsequent and largely symbolic vote, 56% of the company’s shareholders voted to approve the pill.
In recent weeks, the two sides have engaged in preliminary talks about a potential deal under which Icahn would win seats on Lions Gate’s board of directors in exchange for halting his takeover efforts. One potential complication is that the studio’s largest investor, board member Mark Rachesky, may object to someone who owns fewer shares but gains more power. Icahn owns nearly 19% of Lions Gate, while Rachesky’s stake is just under 20%.
While Lions Gate and Icahn have had on-and-off discussions since October 2008, when he began increasing his stake, those talks never led to a resolution.
If the two sides are unable to reach an agreement now and Icahn’s takeover bid fails, he could start a proxy battle to replace the board of directors, which would cost the studio millions of dollars to fight. It has already spent several million dollars on legal fees fighting Icahn, according to a person familiar with the situation.
For the moment, Lions Gate’s board is continuing to recommend that its shareholders reject Icahn’s offer and has put $16 million in a trust that would pay severance to the company’s top managers, including Chief Executive Jon Feltheimer and Vice Chairman Michael Burns, in the event they are ousted without cause after a takeover by Icahn.
The investor has said he would replace the top management if he prevails in his takeover.
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