Lions Gate Entertainment Inc., the studio behind the Oscar-winning Precious: Based on the Novel Push by Sapphire, is both urging its shareholders to turn down a "coercive" offer from Carl Icahn and vowing to block the billionaire's bid with a poison pill.
In a filing yesterday to the U.S. Securities and Exchange Commission, the company officially responded to Mr. Icahn's bid to increase his stake in the company to 29.9 per cent, announced last month.
Mr. Icahn has been sharply critical of Lions Gate's move to acquire the TV Guide Network. Currently owning 18.9 per cent of the company's stock, he has been agitating for more say at the film studio in order, he says, to "protect" his investment.
Lions Gate calls his $6-a-share offer "financially inadequate," and warns that Mr. Icahn has little experience in the film business. Handing him more control could derail the film studio's long-term plans, Lions Gate warns.
The two sides had been in talks for more than a year, partly to hammer out the terms of giving Mr. Icahn's representatives, including his son, Brett, seats on Lions Gate's board. But the talks, some of which included Lions Gate director and former Liberal federal cabinet minister Brian Tobin, broke down last month.
Lions Gate's poison pill, also known as a shareholder rights plan, would see one share purchase right issued for each outstanding common share as of March 22, 2010, a move designed to make Mr. Icahn's bid more expensive.
In a phone interview with The Globe and Mail, Lions Gate vice-chairman Michael Burns said the plan - to be voted on by shareholders at a May 4 meeting - was needed to block a bad deal.
"We adopted a shareholders rights plan protecting all shareholders because we think basically this is coercive and also an unfair attempt to takeover Lions Gate without affording all of the shareholders fair value for their shares," Mr. Burns said.
He denied suggestions in Mr. Icahn's SEC filing that the Vancouver-based Lions Gate was considering leaving Canada in order to better fend off Mr. Icahn. Canadian securities regulators typically restrict the use of poison pills.
Mr. Burns said his company, which conducts most of its business in Santa Monica, Calif., did apply to the British Columbia Securities Commission to end its status as a "reporting issuer" in Canada.
But he said this would not have affected where the company was based. The application, withdrawn after Mr. Icahn protested, was only meant to save money in fees, he said, since Lions Gate was delisted on the Toronto Stock Exchange because most of its stock trades in New York.
"There's nothing in the works about us leaving Canada. Two-thirds of our board are Canadian," Mr. Burns said, pointing out Lions Gate TV projects shooting in Canadian cities. "We hold our annual meeting in Toronto, so that should give you a pretty good indication of how we feel."
Mr. Burns said Mr. Icahn's criticism of Lions Gate's $225-million acquisition last year of the TV Guide Network and tvguide.com "doesn't make a lot of sense," arguing the TV Guide holdings are now worth almost twice what Lions Gate paid for them. (Lions Gate sold a 49-per-cent stake to JPMorgan Chase & Co. in TV Guide for $123-million shortly afterward.)
In its SEC filing, Lions Gate also warns that if any one shareholder gains more than a 20-per-cent stake, this could violate the terms of one of its lines of credit and put the film studio in default. Mr. Icahn, in his SEC filing, dismisses this idea, saying a default could be avoided.
Lions Gate (LGF)
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