Lionsgate has a message for its shareholders — endorse Carl Icahn at your own peril.
The billionaire investor and Lionsgate's largest stakeholder made his umpteenth play for control of the Vancouver based studio last week when he unveiled the team of loyalists and industry veterans he'd like to see take the company's reins.
In a note to shareholders, Lionsgate's board once again called on its shareholders to reject Icahn's rebel slate of board members. The studio reiterated its call for investors to confirm its own nominees at the company's annual meeting on Dec. 14.
The Lionsgate board also urged stakeholders to discard any proxy materials they receive from the Icahn Group.
It's nothing that the studio's brass hasn't said before, but this time it arrived in a letter that argued that a vote for Icahn's group endangered shareholders' investments. In a letter co-signed by CEO Jon Feltheimer and Vice Chairman Michael Burns, Lionsgate pointed to its recent string of box office successes and its expansion of its television slates as reasons to stay the course.
Icahn has been engaged in a proxy fight for control of the studio for much of the past year. The board candidates he submitted on Friday were former Overture chief Chris McGurk, former film executive Jay Firestone, former music executive Michael Dornemann, lawyer Daniel A. Ninivaggi and Harold T. Shapiro, the former president of Princeton.
Here's the full text of the note Lionsgate sent to shareholders:
November 29, 2010
Dear Fellow Lionsgate Shareholder:
As Lionsgate’s 2010 Annual General Meeting of Shareholders approaches, your Board of Directors urges you to vote the WHITE proxy card to elect the Company’s highly qualified and experienced nominees. Your Board and management team strongly believe that Lionsgate’s results over the past year underscore the success of its strategy to deliver value to shareholders by achieving strong and consistent growth from Lionsgate’s diversified portfolio of businesses.
On the other hand, the Icahn Group has not articulated a vision, much less a strategy, for Lionsgate regarding how it would improve on these results and its nominees provide no further clarity on the critical issue of leading Lionsgate into the future. Instead, the Icahn Group’s self-serving agenda stands to take away from the value of your investment.
Your Board and management team are confident that its strategy has Lionsgate on track to continue to build its momentum and to deliver value to shareholders. Now is certainly not the time to make a change.
To protect and to realize the value of your Lionsgate investment, your Board urges you to please vote FOR the Lionsgate director nominees on the WHITE proxy card.
THE LIONSGATE BOARD IS COMMITTED TO DELIVERING VALUE
TO ALL LIONSGATE SHAREHOLDERS
Over the past ten years, the current Board and management team have developed and executed on a disciplined plan to create a diversified media business that is creating long term value for Lionsgate shareholders. As a result of this plan, Lionsgate today has a world-class media platform that leverages content creation, production and distribution across diverse channels.
Due to the Board’s and management team’s leadership:
· Over the past ten years, Lionsgate stock has appreciated by 341%, while, over the same timeframe, the S&P 500 declined 10% and the S&P 500 Media Index declined 33%.[1]
· Over the past 12 months, Lionsgate stock has appreciated by 49%, while, over the same timeframe, the S&P 500 appreciated 9% and the S&P 500 Media Index appreciated 26%.[2]
We believe that the appreciation of Lionsgate stock and the tremendous potential for continued value creation under your Board and management team are the primary reasons why shareholders have overwhelmingly rejected the Icahn Group's tender offer.
Furthermore:
· Lionsgate achieved record EBITDA and revenues in fiscal 2010.
· Revenues grew from $183 million in fiscal 2000 to an approximate $1.6 billion in fiscal 2010, and continue to grow in fiscal 2011 with first half revenues of approximately $783 million.
· Lionsgate’s television business grew from annual revenues of $8 million in fiscal 1999 to approximately $351 million in fiscal 2010 and $168.5 million in the first half of fiscal 2011.
The Lionsgate Board and management team are focused on leading Lionsgate and continuing to execute on its growth strategy for the benefit of all Lionsgate shareholders.
A YEAR OF RECORDS ACROSS LIONSGATE’S MEDIA PLATFORMS DEMONSTRATES OUR GROWTH STRATEGY IS WORKING
Fiscal 2010 was a year of record revenues, major box office achievements, seven Emmy® Awards, three Academy Awards®, new partnerships and growth.
· We achieved an unprecedented year at the box office: Our feature film slate generated more than half a billion dollars at the North American box office during the 2010 calendar year – a company record. Today, our content is more diverse than ever and appeals to broad and different demographics.
· We expanded a thriving television business: Lionsgate operates one of the most efficient television businesses in the industry with one of the highest ratios of series placed on the air relative to shows in development. In fiscal 2010, Mad Men won its second straight Emmy® for Best Drama Series, Weeds continued to achieve record ratings as it enters its seventh season, and Nurse Jackie, starring Emmy® Award-winning actress Edie Falco, is poised to continue our tradition of provocative, acclaimed and successful cable programming. In addition, Debmar-Mercury, a successful acquisition we made in 2006, continued its profitable television distribution and syndication leadership and is now adding a second line of business with two new talk shows poised to join The Wendy Williams Show, which has been renewed by Fox through 2012.
· We demonstrated continued leadership in positioning our home entertainment business at the forefront of new digital platforms: The vast Lionsgate filmed entertainment library continued to benefit from being replenished by hit movies and television titles each year that serve as drivers for the rest of our product, as it achieved its fourth straight year of record revenue and continued its growth in cash flow generation.
· We extended our premium brands to reach new audiences: As a result of our investments in new businesses over the past four years, including TV Guide Network, Epix, Tiger Gate and FEARnet, we continued to expand the audience for our premium brands and properties. In particular, Epix has achieved profitability in its first year since launch and has set in place 7 major carriage deals to date, including a transformative agreement with Netflix earlier this year.
· We maintained industry low overhead: Our growth was achieved while reducing our overhead to one of the lowest levels in the media sector and overhead has declined further this year.
LIONSGATE CONTINUES ITS MOMENTUM IN 2011
Lionsgate’s momentum is evident throughout all of the Company’s businesses and we continue to build on this momentum in fiscal 2011 by:
· Creating exciting new brands and franchises in our film business;
· Preparing three new pilots to enter our television programming pipeline later this year;
· Reaching consumers with a mix of traditional and new media platforms focused on today’s digital marketplace; and
· Continuing to build a channel business that delivers branded content to large niche audiences that we know well and can target cost-effectively.
We believe that this momentum demonstrates that our strategic operating plan is working and will deliver exceptional value to all of our shareholders.
LIONSGATE’S HIGHLY QUALIFIED NOMINEES ARE THE RIGHT CHOICE TO CONTINUE BUILDING VALUE FOR ALL LIONSGATE SHAREHOLDERS
As demonstrated by their recent track record, the Lionsgate Board nominees have the relevant expertise and experience to continue to enhance value for Lionsgate shareholders. In accordance with good corporate governance, ten of our 12 nominees are independent, they all have extensive knowledge of Lionsgate’s business and each are committed to continuing Lionsgate’s success.
In addition to the 11 highly qualified current directors, the Lionsgate Board nominees include Frank Giustra, who would join the Board as an independent Canadian director. Mr. Giustra is a widely respected business leader who possesses strong relationships within the investment community, as well as relevant industry knowledge. As the founder of Lionsgate and its Chairman from 1997 to 2003, Mr. Giustra’s prior experience in the entertainment industry provides the qualifications, skills, perspective and extensive experience that will enhance the existing strengths of the Board.
THE ICAHN GROUP LACKS A VISION, MUCH LESS A STRATEGY,
FOR THE FUTURE OF LIONSGATE
The Icahn Group has not articulated a vision as to how it would improve on the results the Lionsgate Board has achieved. We believe that the Icahn Group’s dissident nominees, who lack a clear direction, are unlikely to continue Lionsgate’s recent success and, if elected, could impair the value of your investment in Lionsgate by deviating from the Board’s proven strategy to build value that has Lionsgate poised for continued future success.
VOTE FOR LIONSGATE’S NOMINEES
With Lionsgate poised for future success, now is not the time to make a change.
Do not risk the future of your Lionsgate investment. Time is of the essence. Your Board urges you to please vote FOR Lionsgate’s director nominees on the WHITE proxy card today and to discard the Icahn Group’s proxy materials.
Since time is short, vote the WHITE proxy card by phone or internet.
We have appreciated and look forward to your continued support.
Sincerely,
/s/ Jon Feltheimer /s/ Michael Burns
Jon Feltheimer Michael Burns
Co−Chairman and Chief Executive Officer Vice Chairman
