Carl Icahn steps up fight with Lions Gate

FILE - In this May 7, 2007 file photo, billionaire financier Carl Icahn is seen as he arrives at the Motorola annual meeting in Chicago. Icahn said Tuesday, June 1, 2010, he will again extend his offer to buy Lions Gate Entertainment Corp., and removed the condition of the offer requiring at least 50.1 percent of shares to be tendered.(AP Photo/Charles Rex Arbogast, File)

June 11, 2010 7:02:40 PM PDT
Billionaire investor Carl Icahn stepped up his effort to take control of the boutique movie studio Lions Gate Entertainment Corp. on Friday, saying he will put up his own slate of candidates to replace the company's board.

Icahn, who has a roughly 19 percent stake in Lions Gate, has been tussling with management since last year.

In a lengthy open letter to the company's board Friday, Icahn jabbed at Lions Gate's directors for allowing its stock price to sink and for trying to block his efforts to buy up the company's shares. He said he hopes a new board will move quickly to replace management.

"Since the board is clearly unwilling to tell the emperor he wears no clothes, it is left up to the shareholders to take action," Icahn said in his letter.

Trying to replace the board is a familiar tactic for Icahn.

In one recent battle, he tried to oust Yahoo Inc.'s board in 2008 after the company turned down Microsoft Corp.'s $47.5 billion takeover offer. Yahoo eventually appeased Icahn by allowing him to take a board seat himself rather than kicking out the rest of the company's directors. Icahn left Yahoo's board last year, happy with the company's new CEO, Carol Bartz, and its decision to hire Microsoft to provide search results.

In the case of Lions Gate, he is looking to take over the entire company. Lions Gate, which is based in Vancouver, British Columbia, but has most of its operations in Santa Monica, Calif., backed the Oscar-winning movie "Precious: Based on the Novel `Push' By Sapphire." It also owns the TV Guide network and produces television shows, including "Weeds" and "Mad Men."

Icahn is offering the studio's stockholders $7 per share for the stake that he doesn't already own, up from a previous offer of $6. The bid expires Wednesday and so far shareholders representing about 3.7 percent of the outstanding stock have accepted. Icahn has said he will not raise the offer.

Though it did not respond directly to the barbs in Icahn's letter, Lions Gate issued a statement again urging shareholders to reject his "inadequate" offer."

Lions Gate shares fell 2 cents to close Friday at $6.97. The shares have traded between $4.81 and $7.37 over the past year.

Lions Gate shareholder Mark Cuban, owner of the NBA's Dallas Mavericks, has tendered his 6.4 million shares to Icahn, according to a regulatory filing Friday. Cuban still could change his mind and sell the shares on the open market or to another bidder, the documents said. Barring an about-face, Cuban's tender will put Icahn's Lions Gate stake over the 20 percent threshold that company says would trigger a default on debts of about $53 million, according to a filing earlier this month.

Lions Gate said it is in talks with its lenders, which include JPMorgan Chase & Co., and is confident it can get a waiver that would prevent a default if necessary. JPMorgan spokesman Justin Perras declined to comment.

But Icahn says Lions Gate has been warning shareholders that his ownership of a 20 percent stake would also trigger "cross-defaults" of $472 million on bonds.

In his letter Friday, Icahn criticized Lions Gate for writing terms into its debt contracts that would "frighten" investors into opposing his bid. "Had the board not agreed to these controversial 'poison put' provisions in the first place, shareholders would not be in the dire situation in which we now find ourselves," he said.

Lions Gate said it also welcomes the chance to review the terms of a bridge loan that Icahn has offered to prevent a default. But Lions Gate said Icahn has not made the information available to the company or the public.