After a 10-day hiatus that ended on July 19, 2010, the billionaire investor, Carl Icahn, who steadily built his stake of 37.9% through his earlier bid, has renewed his hostile bid to acquire the remaining shares in Lions Gate Entertainment Corporation (LGF) for $6.50 per share, 50 cents less than his previous offer of $7.00 that expired on June 30, 2010.
The offer values Lions Gate, the movie studio, at approximately $767.7 million, based on the number of outstanding shares as of June 1, 2010, and would require Carl Icahn to shell out $476.7 million to acquire the remaining shares.
In order to build its defense against Carl Icahn’s hostile bid, Lions Gate converted approximately $100 million of convertible bonds into equity thereby, diluting his stake to 33.5%. The move increased the company’s share count to 135 million from 119 million, and also lowered its leverage ratio.
The conversion took place at a price of $6.20 per share, representing a 2.8% premium to Monday’s closing price of $6.03. However, the renewed bid of Carl Icahn led the stock to jump 8.3% or 50 cents to close at $6.53 on Tuesday. The renewed offer is slated to expire on August 25, 2010.
Before the launch of his hostile takeover bid, Carl Icahn owned 18.9% in Lions Gate. Despite failing in his attempts to gain control of the company, he remains one of the major shareholders of the film studio, and has the power to influence the company’s decisions regarding any merger, acquisition or asset sale.
The possible purchase or merger discussion of Lions Gate with Metro-Goldwyn-Mayer would also require Carl Icahn’s approval, who had earlier opposed the company’s $1.4 billion bid to acquire the studio due to shrinking DVD sales amid the economic downturn and the increase in digital film distribution. It is still too early to comment whether the deal between the two film studios will materialize.
Mr. Icahn had earlier made clear that if he succeeds in his current takeover bid, he would replace the company’s top management and board with his nominees as he believes that the current board is not fit to guide the company through the difficult period.
Lions Gate is a film studio, which produces and distributes motion pictures for theatrical and straight-to-video release, and television programming for the cable and broadcast networks.
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