Shareholders are being invited to get involved in the tussle between Lions Gate Entertainment Corp. and billionaire activist investor Carl Icahn, who already controls about 19 percent of the company's stock.
Lions Gate notified shareholders Friday they can have a say in Icahn's attempt to gain control of the boutique movie studio if they vote at a special meeting May 4 in Toronto on a shareholder rights plan, a strategic move used by public companies to avoid unwelcome takeovers.
The company, which operates out of Santa Monica, Calif., but is based in Vancouver, British Columbia, noted it is not proposing a U.S.-style plan giving the board discretion over whether to permit a bid. Instead, the plan would allow a bid accepted by a majority of independent shareholders to proceed even if the board and management oppose it.
Icahn and other investors offered March 1 to buy up to 13.2 million shares of Lions Gate at $6 apiece. The company's board rejected the offer 10 days later. Icahn renewed the offer March 19, and the board nixed it again.
In its letter to shareholders asking for votes in favor of the plan, the board said the offer "is financially inadequate and coercive and is not in the best interests of Lions Gate, its shareholders and other stakeholders."
In bold, capital letters, the letter warns shareholders Icahn's group is "seeking total control of your company without paying you a control premium."
The board notes that the offer price is just 14.7 percent higher than the closing stock price before Icahn started the tender offer, and it warns that if Icahn owns more than 20 percent of the company, that could trigger provisions in one of Lions Gate's debt agreements requiring the loan be repaid ahead early.
Friday's proxy statement shows Icahn already owns about 19 percent of Lions Gate's stock, making him the second-largest shareholder behind Mark H. Rachesky of MHR Capital Partners. Icahn's offer, if it succeeded, would raise his stake to about 30 percent.
The board's letter also criticizes comments Icahn has made to the press about Lions Gate, including one that appears to imply he wants the company to act only as a distributor and not to produce movies or television shows.
On Wednesday, Icahn released a letter he had sent CEO Jon Feltheimer saying Lions Gate's board failed shareholders by rejecting his $575 million offer. He said Lions Gate has rewarded executives with "bonuses, options and golden parachutes" even as the value of the company's stock declined.
In morning trading, Lions Gate shares fell 11 cents to $6.19 per share. They have changed hands between $4.41 and $7.29 in the past 52 weeks.
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