UPDATE: Lots of news about this big Hollywood-Wall Street battle. (I love the smell of napalm in the boardroom…) The latest is the Fight Club that Lionsgate management is assembling to defend itself against the corporate raiding and shareholder activism of Carl Icahn who is right now pricing his tender offer to buy the mini-major’s convertible debt. The Moxie Squad consist of bankers Paul Taubman and Stuart Epstein of Morgan Stanley; the law firm of Wachtell, Lipton, Rosen and Katz; the PR firm of Joele Frank, Wilkinson Brimmer Katcher (which in 2007 helped Motorola fend off Big Bad Carl, but they’re dumb as dirt about Hollywood judging from my own experience with them); and Dan Burch of the proxy solicitation firm of Mackenzie Partners.
On the one hand, Lionsgate is trying to convince reporters not to read too much into its new high-priced team-for-hire. “Mr. Icahn is the one who has the time to figure out his strategies. We have a company to run, and what he’s doing is a distraction,” an insider tells me. But the mini-major is planning to fight not only Icahn’s attempt to buy up Lionsgate’s debt, but also anticipating that he’ll launch a proxy contest sooner rather than later.
True, Icahn has several proxy fights going on at any one time. And Lionsgate’s next shareholders meeting is scheduled for as soon as September. But Icahn still could have that time frame accelerated and ask for a special shareholders meeting held sooner. Although Icahn has not yet announced any proxy fight, one sure looks to be looming. BusinessWeek has been told that he plans to launch his proxy bid well in advance of the Lionsgate annual meeting.
Proxy fights are notoriously expensive to mount and don’t often succeed. (Remember Stanley Gold’s and Roy Disney’s against Walt Disney’s Michael Eisner?) But many times they do have the effect of destabilizing management . (Remember that Eisner not only gave up the Chairman title but wound up resigning from the company altogether after he narrowly defeated a “No Confidence” vote by shareholders.)
Lionsgate will claim, even though its stock price is at rock bottom, that the company has a successful 9-year track record and its shares have performed equal to or better over the past 5 years than others in the media sector. But Icahn surely can tap into national shareholder anger at sitting managements presiding over stocks in the crapper, as well as argue specifics that Lionsgate has gotten too far away from its core business of making low-cost films for high profits by spending too much with little to show from it.
Even as it was assembling its Fight Club, Lionsgate was already spinning like a top by badmouthing Icahn and even his son. Management has been telling Hollywood privately that the only reason Icahn is going after the mini-major is because “he wants it for his son”. True, Icahn wanted to give one of the four Lionsgate board seats he was seeking to his 29-year-old son Brett. But this is not an outrageous demand. A Princeton grad like his father, Brett worked for years under the radar as an analyst for his dad’s investment company. He has been one of 10 young traders moving the firm’s cash and its hedge fund, which the family started two years ago with $1 billion. And he serves on the board of several companies wholly or partly owned by his dadirms. He has shown more than a passing interest in the entertainment biz by raising money (with a chunk from dad) to launch a social network/film production tool that brings film creatives and movie fans together to make movies, and by founding an interactive software publishing company which is controlled by his dad.
The battling started as Lionsgate’s stock price plummetted. And the mini-major surprised Wall Street when it announced poor results from its 3rd fiscal quarter. Then there’s its valuable library. Realizing the company was vulnerable, Lionsgate’s lenders, led by JPMorgan Chase, insisted on amending the company’s $340 million credit facility and added covenants that could put the studio in default were “any person or group” to buy “ownership or control in excess of 20% of equity securities.” But this was not widely known.
Lionsgate tried for weeks to spin its battle with Icahn as amicable even though he was buying up as much as 15% of the public company’s shares on the open market. The nastiness finally came out into the open this month when Icahn said in an SEC filing that he wanted to add and subtract Lionsgate board members, Lthe studio insisted on a standstill agreement, and on March 11th Lionsgate broke off talks with the billionaire over those seats.
Still facing that 20% default trigger, Icahn has stopped buying stock and now wants convertible debt.
Today, Icahn announced the pricing terms of his tender offer for Lionsgate’s convertible senior subordinated notes. The corporate raider/shareholder activist now wants to purchase as much as $325 million in Lionsgate debt that can be converted into company shares. So now he will buy 3.6250% notes due 2025 at $730 for each $1,000 principal amount. (So the tender is $7.30 per $10 of the convert.)
But one of my financial sources emails me this view: “The news is not as much how he is pricing the tender (which is really no more than what the converts are trading in the market today so why should people tender their instruments) but that there is really not much news surrounding the terms of the tender. If someone really wants to engage in a tender they lay out all the specifics. I think this is a paper tiger tender offer.” Maybe, but Icahn and Lionsgate both have claws.
- NASTY, NASTY NASTY: Lionsgate Forms Fight Club
- Icahn Prices Tender Offer For LG Debt
- And Say What About Carl’s Son?
- Carl Icahn Offers To Buy Lionsgate Debt
- Icahn Ends Talks With Lionsgate
- Lionsgate And Icahn Talking Board Seats
- Icahn & Rachesky Add To Lionsgate Stakes
- Lionsgate Getting Eaten Alive By Hunters
- Another Update On Icahn vs Lionsgate
- Icahn Interested In MGM, Too?
- Carl Icahn Notifies SEC That He May Add Or Remove Lionsgate Board Members
- Carl Icahn Ups Stake in Lionsgate To 13%
- Carl Icahn Increases Stake Still More In Lionsgate; What It Means…
- Carl Icahn May Be Amassing Bigger Stake In Lionsgate Than Most People Realize
- Icahn Ups Lionsgate Stake; Stock In Freefall After Lousy Quarter
- Michael Burns Loses 1/2 Lionsgate Stake
- Carl Icahn Takes 9% Stake In Lionsgate