Billionaire activist investor Carl Icahn made an impassioned plea Monday to shareholders of Lions Gate Entertainment Corp., the movie studio he wishes to take over, saying that he has a better plan than management to improve operations.
Icahn said he has owned Lions Gate stock for 4 1/2 years, at which time the stock has plunged from more than $12 to $4.85 a few months ago.
The stock has rebounded since then, he said, due to his offer to buy shares from stockholders at $7 each and after Lions Gate joined the Russell 2000 Index. Joining an index typically boosts a company's stock price because funds that invest in an index must buy shares of all the companies listed.
Shares of Lions Gate, based in North Vancouver, British Columbia with operations in Santa Monica, Calif., fell 10 cents to $7.17 in morning trading.
Lions Gate is behind the Oscar-winning movie "Precious: Based on the Novel 'Push' By Sapphire." It made the "Saw" horror movies and such television shows as "Weeds" and "Nurse Jackie."
Icahn said Lions Gate's cash flow for 2010 before capital expenditures was $24 million, which would be erased if the company's film library income fell by 25 percent.
He also said that once his $7 per share offer expires on Wednesday and the effect of joining a stock index fades, the share price is likely to fall.
In April, Icahn raised his offer to buy Lions Gate shares by $1 to $7 per share. The stock was trading at just over $6 at the time.
Icahn said he agreed to pay a premium for Lions Gate shares because he believes he has a better plan for the company than management. He thinks Lions Gate should be a distributor of independent films, not a producer, especially of big budget movies. It also must drastically reduce its annual operating expenses of $180 million and "clean up" its balance sheet.
After meeting with management over several years, "it became clear that Lions Gate's board and management's views of the road Lions Gate should take was diametrically opposed to the one I have just outlined," he said in a statement.
Therefore, the only way to reverse the company's direction was to become an ever larger shareholder, Icahn said.
Icahn currently holds more than 37 million shares, or a 32 percent stake in Lions Gate.
Lions Gate didn't immediately respond to a request for comment.
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