(Updated: 11:48 a.m.)
Call it the battle of the shareholder advisory firms.
After Institutional Shareholder Services endorsed three of the candidates from Carl Icahn's renegade slate of board directors, Lionsgate countered that it had it had received approval for its own slate from a different group.
Glass Lewis & Co. rejected all of the billionaire investors nominees and supported Lionsgate's candidates.
The embattled studio also emphasized the ISS had rejected former Princeton president Harold Shapiro's and former Overture CEO Chris McGurk's nominations.
“Perhaps most notable, however, is the substantial absence of a plan by the Dissident…we see no disclosure that suggests that the Dissident nominees have a framework around which to build an improved Lions Gate," Glass Lewis wrote in its note.
Glass Lewis also raised the possibility that a possible merger with MGM — a notion that has been bandied about by both Icahn and Lionsgate's leadership — could represent a conflict of interest because Icahn owns a substantial amount of that studio's debt.
Earlier:
Less than a week before the shareholder vote that will determine the leadership of Lionsgate,a major shareholder advisory firm has issued its recommendations — giving its stamp of approval to three of the five board members nominated by Carl Icahn in his proxy fight with the studio.
Rockville, Maryland-based Institutional Shareholder Services also noted heavy Lionsgate losses in recent years and predicted a tough road to profitability.
The report, issued Thursday, recommends former film executive Jay Firestone, lawyer Daniel A. Ninivaggi and former music executive Michael Dornemann be voted by shareholders into the Lionsgate board.
However, ISS did not recommend two members of Icahn’s proposed slate: Harold Shapiro, the former president of Princeton; and, most notably, Chris McGurk, the former chief executive of Overture.
Echoing Icahn, the report says that Lionsgate's "shares lost nearly half their market value over the past five fiscal years… reflecting the market's increasing wariness of a company which has spent $235 million on 'non-core assets' which are either losing money or in 'sharp decline,' and whose net losses in the last three years alone total nearly $300 million."
It adds: "While recognizing that the company has no compelling peers, ISS notes that total shareholder returns over the past five years – down 27.9 percent — are nearly 22 percentage points worse than the average of other media conglomerates, and 24.6 percentage points worse than the S&P 500 index, even accounting for the clear uplift the Icahn tender offers have provided over the past 9 months.
"Though revenue growth has been respectable for the past three years, analyst consensus predicts it will grow more slowly over the next three, and the company will continue to struggle to convert it to profitability."
Large shareholders often follow ISS's recommendations on how to vote in corporate controversies. The firm analyzes proxy statements and provides voting advice to more than 1,700 clients.
The vote of confidence in Icahn's slate, even in part, is a victory for the corporate raider, who has been engaged in a hostile takeover bid for Lionsgate for much of the past year.
On Monday, he launched SaveLionsGate.com, which discloses portions of private, potentially embarassing e-mails and texts between Lionsgate executives Mark Rachesky and Michael Burns on the studio’s strategy to thwart the takeover.
ISS's report also appears to be a blow to Lionsgate, which has been working to stave off Icahn's bid.
Lionsgate has urged shareholders to vote for its own slate of nominees at the company's annual meeting on Dec. 14.
