Welcome to the real-life game of Survivor: Wall Street. Lionsgate management tonight is trying to outwit, outplay, and outlast Carl Icahn before he effects a hostile takeover of the movie/TV studio for his son Brett. Lionsgate tonight announced it’s putting into place a “Shareholder Rights Plan” — i.e. a poison pill defense — to cap Icahn at 38% of its stock (he is currently at 37.9%) so he can’t do a “creeping bid” through open market purchases like he did today or private market transactions. “If he wants control of the Company, he should make a bid that is fair to all shareholders along the lines of a permitted bid described in the press release below,” a studio insider tells me.
Today, Icahn’s stake rose to 37.9%, or 44.8M shares, of Lionsgate. With 12+% more stock, he can become its majority stockholder. And then Lionsgate’s 12-member board, and the studio’s management team of Jon Feltheimer and Michael Burns, all have a target on their backs. Icahn’s $7 a share tender offer expired at midnight Wednesday, and left him with a 33.9% stake in Lionsgate. (Icahn Now Owns 33.9% Of Lionsgate) Today, he acquired an additional 4% more of the company by buying on the open market. Lionsgate’s immediate reaction was effectively to enact a poison pill defense. But it enacted a poison pill months ago — to prevent Icahn from accumulating over 20% of Lionsgate stock through his tender offer — and Canadian regulators nixed that measure. Can that happen again?
Here is tonight’s Lionsgate statement:
SANTA MONICA, Calif., and VANCOUVER, British Columbia, July 1, 2010 — Lionsgate (the “Company”) today announced that its Board of Directors has adopted a Shareholder Rights Plan that is designed to encourage the fair and equal treatment of Lionsgate’s shareholders in connection with any initiative to acquire effective control of the Company.
The Rights Plan specifically addresses circumstances in which current Canadian and U.S. securities legislation allows significant interests in a company to be established or increased through a “creeping bid” (for example, through private agreement purchases at a premium to market prices from a small number of shareholders or through exempt market purchases). The Rights Plan is also intended to ensure that, in the context of a formal tender offer, the Board of Directors has sufficient time to explore and develop alternatives for maximizing shareholder value, to provide adequate time for competing transactions to emerge
and to ensure that shareholders have an equal opportunity to participate in such a bid.
The Rights Plan encourages the acquisition of effective control of
Lionsgate only through means of a “permitted bid” or a negotiated transaction that treats shareholders equally and fairly. A permitted bid is one that, among other things, is supported by a majority of Lionsgate’s shareholders other than the person making the bid (and its affiliates, associates and joint actors), and includes bids for less than all of the outstanding shares.
Under the Rights Plan, one share purchase right will be issued and attached to each outstanding common share of Lionsgate as of the close of business on July 12, 2010 (and each share issued thereafter). The rights will become exercisable only if a person, together with its affiliates, associates and joint actors, acquires or announces an intention to acquire beneficial ownership of shares which, when aggregated with its current holdings, total 38% or more of Lionsgate’s outstanding common shares, subject to the ability of the Board of Directors to defer the time at which the rights become exercisable.
Following the acquisition of more than 38% of the outstanding common shares by any person (and its affiliates, associates and joint actors), each right held by a person other than the acquiring person (and its affiliates, associates and joint actors) would, upon exercise, entitle the holder to purchase Lionsgate common shares at a substantial discount to their then prevailing market price.
A copy of the rights plan is available on the Security and Exchange Commission’s website, www.sec.gov.