Icahn-Lions Gate talks at standstill as takeover offer extended again

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With once promising talks between the two sides at a standstill, Carl Icahn has again extended his $7 per share tender offer to take control of Lions Gate Entertainment.

In a clear sign that parties are still very much at odds, activist investor Icahn took another public swipe at Lions Gate’s board, calling its recent decision to put aside $16 million for potential golden parachutes for top executives ‘reprehensible.’

‘[T]his latest action, together with the board’s failed and misguided attempts to implement a poison pill and its reckless retention... of no less than six professional advisory firms... to defend against our offer, shows just how far removed this board has become from its mission of holding management accountable and safeguarding the interests of shareholders,’ Icahn said in a statement.

As of late last week, representatives for Icahn and Lions Gate were engaged in discussions about a potential settlement to end the activist investor’s two-month-long battle to seize of the Santa Monica-based film and television studio.

According to people familiar with the situation, however, those talks hit a sticking point for the time being. The primary issue was how much power Icahn would be able to exercise on the board of directors relative to his holdings, which are currently just under 19%. Icahn previously said he wants his son Brett to join the board and sit on newly formed committees overseeing production costs and overhead expenses, both of which the investor has said are too high.

In Friday’s announcement, Icahn extended his offer only seven business days, to June 1. His previous two extensions were both for 10 business days.

As of noon Eastern on Friday, Icahn said 4.66 million shares had been tendered to him, about 4% of the company’s total outstanding shares. Two weeks ago, before the last extension, just under 7.5 million shares had been tendered.

Despite the ongoing tension and apparent lack of progress in his current tender, Icahn did not announce any changes to his offer terms Friday. His options include increasing the offer price and lowering the threshold of stock he needs to own for his tender to take effect, which currently stands at just over 50%.
At amounts between 20% and 50% Icahn would not technically control Lions Gate, but would be able to exercise significant power over its business decisions.

His final and most aggressive option would be to launch a proxy war and put up his own slate of directors to take control of Lions Gate’s board.

It’s also possible, of course, that productive talks could restart and the two sides will reach an agreement and drop their long-running public battle.

Lions Gate’s attempts to enact a ‘poison pill’ provision that would block a takeover of the company have been stymied by officials in Canada, where the company is legally domiciled.

Icahn could not be reached for comment. Lions Gate has not released a public statement in response to Icahn’s statement.

--Ben Fritz and Claudia Eller