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Mark Cuban passes Lions Gate stock to Carl Icahn

June 10, 2010 | 11:28 am

MarkCuban Media entrepreneur and Dallas Mavericks owner Mark Cuban said on CNBC Thursday morning that he will likely tender his shares of Lions Gate Entertainment to Carl Icahn, pushing the activist investor closer to taking control of the Santa Monica movie and TV studio.

"I really think I'm going to tender and I will have a conversation with them [Lions Gate management] today," Cuban said on the CNBC program "Strategy Session." When asked about his motivation, Cuban said, "I have my reasons [that] I don't want to get into. But I think it's the right move for right now and the right move for the long term, for the company and me."

With Cuban's shares, Icahn would become Lions Gate's largest shareholder. Cuban owns 5.3% of Lions Gate stock, according to an April SEC filing. Icahn already owns nearly 19%; approximately 4% of shareholders had agreed to tender to him before he extended his $7 a share tender offer on June 1. When his bid expires on June 16, Icahn would likely own at least 28% of Lions Gate stock.

Reacting to Cuban's decision, a Lions Gate spokesman said, "We believe that he's leaving money on the table." Lions Gate shares were down 6 cents to $6.99 in midday trading.

Icahn said last week he will wage a proxy battle to take over the studio's board.

Indeed, Cuban could become a candidate for Icahn's slate of directors. In 2008, Cuban was on the investor's proxy slate to seize control of Yahoo's board. (Yahoo bought Cuban's Internet streaming service Broadcast.com for $5 billion in 1999.)

Once Icahn's stake exceeds 20%, it would trigger a technical default under the terms of Lions Gate's $340-million revolving credit facility with JPMorgan Chase. However, the bank could grant the studio a waiver. Icahn has said he would provide a bridge loan if necessary.

If Icahn's holdings increase above 33%, Lions Gate's five top executives, including Chief Executive Jon Feltheimer and Vice Chairman Michael Burns, could leave the company with multimillion-dollar payouts, and the investor could veto any major acquisitions.

Earlier this week, Icahn received the blessing of the Canadian government to take over the company. Though Lions Gate operates out of Santa Monica, it is legally domiciled in Canada.

After Icahn's offer expires June 16, there will be an additional 14 days for shareholders who have not yet tendered to do so.

-- Ben Fritz, Claudia Eller and Dawn C. Chmielewski

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Photo: Mark Cuban at a Dallas Mavericks game. Credit: Don Ryan / Associated Press.

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