Regulators in British Columbia on Tuesday voided a shareholders rights plan by Lions Gate Entertainment Corp. that would have prevented a takeover attempt by investor Carl Icahn.
A British Columbia Securities Commission spokeswoman confirmed the decision, which halts the trading of any securities that would be issued under the plan, rendering it ineffective.
Icahn said in a statement the decision will allow shareholders in the movie studio to decide for themselves whether they will sell shares to him for his offer price of $7 apiece "without interference from the board."
Lions Gate's shares jumped 45 cents, or nearly 7 percent, to $7.07 in after-hours trading on Tuesday. That suggests investors still believe a higher bid will emerge.
The decision was a major victory for Icahn, who holds a nearly 19 percent stake in the Vancouver-based company, which is operated out of Santa Monica. He had earlier offered to buy shares for $6 but sweetened his bid two weeks ago when the company opposed it. Lions Gate also opposed the $7 offer, calling it too low.
If Lions Gate's shareholders rights plan had been allowed by the commission, it would have allowed the company to issue shares in a such a way as to massively dilute the shares of any hostile bidder if his stake exceeded 20 percent.
Lions Gate said in a statement Tuesday that it was "disappointed" by the ruling and was considering all its options, including an appeal. It continued to urge shareholders to vote in favor of the rights plan at a May 4 meeting and to reject Icahn's bid.
Icahn said in a statement he was "gratified" the commission agreed with his view and said the ruling was "consistent with its vision to play a leading role in securities regulation that inspires investor confidence."
The commission did not explain its ruling. It has 90 days to state its reasons.
Icahn's offer expires on Friday at 8 p.m. EDT, although he said he may extend or withdraw it.
The activist investor has set conditions on his offer so that he can stop buying shares if he reaches 50.1 percent control. The company has said that could leave investors with a stake in a company he controls, a possibility that it said created a coercive and uncertain environment for shareholders.
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