Carl Icahn rips into Lions Gate board in open letter [Updated]
UPDATED [11:50 a.m]: Lions Gate says in a statement that it "continues to engage in discussions with its lenders to seek a wavier or amendment to its credit facilities in order to prevent an event of default" but "will welcome the opportunity to review the actual terms of a proposed bridge facility from Mr. Icahn." The studio added that Icahn hasn't yet "shared" the details of his bridge proposal and "should disclose those terms to the company and to the public." END UPDATE.
In a strongly worded missive aimed at urging Lions Gate stakeholders to sell their shares to him by Wednesday's tender offer deadline, Carl Icahn admonished the company's board for its "apparent ambivalence regarding Lions Gate fate."
In an open letter to the 12-member board, Icahn said he was "truly mystified by some of your actions and your inaction in the face of the abject failure of the current management to deliver value to shareholders, and I fear for the future of our company."
Icahn, who is poised to own 28% or more of Lions Gate's stock and become the company's largest shareholder when his $7-a-share takeover offer expires next week, chided the board for not having a preemptive measure in place for potential default under the terms of the company's revolving credit facility that would be triggered once Icahn's holdings exceed 20%.
Lions Gate is hoping to obtain a waiver from its lead bank, JPMorgan Chase, but Icahn claims "there is no assurance that your lenders will waive such defaults," which he says could "lead to the ultimate implosion of the company." If Lions Gate were unable to get the necessary waivers or an alternative source of financing to repay the debt in full, the company may have to file for voluntary bankruptcy or, under certain circumstances, be forced into involuntary bankruptcy by its lenders, bondholders or other creditors.
Icahn also blasted Lions Gate board for having "ignored" his attempts to discuss his offer to provide a possible bridge loan as a "preemptive measure" to enable the company to refinance its debt in the event of default.
"Although we suspect that you will continue burying your heads in the sand with respect to this impending disaster," Icahn wrote in his letter, "we advise you again that we stand ready to begin discussions with you immediately regarding the terms of a bridge facility." He added, "...I remain confused as to why you refuse to deal with the ticking time bomb sitting in your debt documents."
Icahn, who currently owns nearly 19% of Lions Gate stock, said in the letter that he is hopeful that media entrepreneur and Dallas Mavericks owner Mark Cuban will tender his 5.4% as he indicated Thursday that he was contemplating doing. Approximately 4% of shareholders had already agreed to tender to Icahn before the investor extended his hostile bid on June 1.
A Lions Gate spokesman was not immediately available to comment on Icahn's letter.
-- Claudia Eller