Offer tender for 13 million shares could make him the largest stakeholder
Carl Icahn on Tuesday made his most aggressive play to strengthen his grip on Lionsgate (NYSE: LGF), tendering an offer for more than 13 million shares, an amount that could make him the largest stakeholder in the studio.
In combination with his existing 19 percent stake, the additional shares would give Icahn 29.9 percent of the mid-major, which has been fending off the corporate raider for months.
But before Icahn can bully his way in once and for all, he’ll have to clear some hurdles.
If the bid — worth as much as $79 million — is successful, it would trigger a change-of-control default in the company’s revolving credit, allowing its lender to demand accelerated repayment and straining the already maxed-out studio. Icahn asserted in a statement that the default could be avoided if the lenders chose to waive it, or through pre-payment of debt.
But the situation could also block the studio from buying MGM or Miramax, moves Icahn doesn’t want to see happen right now (he’s accused current management of overspending on purchases like TV Guide for $255 million, and for its cushy operating costs of $125 million a year).
What’s more, the offer includes a provision to stop Lionsgate from making any acquisition in excess of $100 million as long as it stands, which also ties Lionsgate’s hands for the moment.
The surprise offer was for $6 per share — about a 14 percent premium over the independent film and TV studio’s Monday closing stock price of $5.23. Lionsgate said in a statement that its board would "review Mr. Icahn’s proposal and will make its recommendation to shareholders promptly."
The stock closed up on Tuesday at $5.48.
Icahn, who has been vocally critical of Lionsgate’s executive leadership, has been slowly building his stake since 2008, and has met plenty of resistance along the way. Last summer, the company turned down his request for two seats on the board. Icahn wanted to install his own mebers, including his son, Brett, but top executives Jon Feltheimer and Michael Burns would only cooperate if Icahn promised to stop upping his stake — a condition he refused.