Icahn throws spanner into Lions Gate bid for MGM
21-Mar-2010 • Bond News
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Mr Icahn, who has been in a long-running battle with the Lions Gate board over the studioâs direction, made his move at a crucial time as the auction of MGM is due to close today.
The studio's difficulties are likely to be a blow to the consortium that owns debt-laden MGM, which has struggled to attract suitors. Lions Gate, which is behind the successful television series Mad Men and the Oscar-winning film Precious, was thought to be one of three bidders still in the auction process.
Mr Icahn, who owns 18.6 per cent of Lions Gate, offered $6 per share to buy at least 50.1 per cent of the company, adding that he was willing to buy all outstanding shares to complete a takeover.
He tried to increase his stake to 30 per cent, also at $6 per share, last month but was rejected by the companyâs board, which described his offer as âfinancially inadequate and coerciveâ.
The $6 offer included a 15 per cent premium on the companyâs share price when Mr Icahn made his first offer in February. This afternoon the stock was trading at $6.06.
In a statement containing the new offer Mr Icahn today criticised the studioâs managementâs rejection of his previous bid.
âLions Gate previously criticised our tender offer for being partial,â he said. âThat is no longer the caseâ.
Mr Icahn wants Lions Gate to give up its pursuit of film library acquisitions, which he said were declining in value due to weak DVD sales, in favour of consolidating film and television distributors.
He said: âLions Gate already has a major investment in a library â its own. It should be up to the shareholders to determine if they wish to more than âdouble downâ on another library."
The takeover attempt faces a number of barriers, including a poison pill instituted last month by the Lions Gate board. Under the terms of the poison pill, once Mr Icahn crosses the 20 per cent ownership threshold his stake would be severely diluted.
The Lions Gateâs board did not immediately respond to the offer.
David Bank, an analyst at RBC Capital Markets, said that the takeover talk was likely to disrupt the companyâs play for MGM. âThis is really about making noise, putting the company into play and damaging Lions Gatesâ ability to overpay," he said.
MGM is not expected to announce until later today whether it has received bids. Time Warner and Access Industries, owned by the Russian billionaire Len Blavatnik, are also expected to make an offer for the studio.
Three other media companies are understood to have dropped out of the race.
MGMâs film library, which holds the James Bond franchise amongst its 4,000 titles, is one of the companyâs most attractive assets, generating $450 million in 2008. The studio, which was bought by a consortium of private equity and media groups for $5 billion in 2005, owes $3.7 billion. Bids were expected to come in at $1.2 billion to $1.5 billion.
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