Carl Icahn, seeking to advance his bid for Lions Gate Entertainment Corp., urged Canadian regulators to invalidate a “poison pill” that makes a hostile takeover of the studio more costly.
The pill, which entitles shareholders to buy more stock at a discount, was implemented by Lions Gate’s board as a “tactical” move against Icahn’s bid, without approval from shareholders, Mark Gelowitz, Icahn’s lawyer, told a three-member panel of the British Columbia Securities Commission at a hearing today in Vancouver.
Securities regulators across Canada, including British Columbia, have made it clear that rights plans adopted without prior shareholder approval won’t generally be found in the best interests of the shareholders, Gelowitz said.
“The time comes eventually for any poison pill when it must go,” Gelowitz said. “It cannot be used simply as a means to block a bid. It can’t be used to just say ‘no.’”
Icahn, who owns almost 19 percent of Lions Gate, is offering $7 a share for the maker of the “Saw” and “Tyler Perry” movies, or about $826 million. A victory would make it easier for Icahn to attract votes for his tender offer, which expires on April 30. A decision favoring the company would bolster Lions Gate’s defense by allowing shareholders to vote on the poison pill on May 4.
“They haven’t just said ‘no,’” Jessica Kimmel, Lions Gate’s lawyer, told the panel in her opening statement, referring to the board. “They said, ‘shareholders it’s up to you to decide.’”
Icahn deliberately set a deadline two business days before the scheduled vote in a bid to pre-empt it, Kimmel said.
A ruling in Icahn’s favor will send a message to all hostile bidders that it’s an acceptable practice in Canada,” Kimmel said.
Icahn, the 74-year-old investor, is up against board members and allies who control more than 30 percent of Lions Gate shares, according to data compiled by Bloomberg.
Mark Rachesky, co-founder of MHR Fund Management LLC, is a former Icahn associate who joined the board in July. He holds 23.2 million shares, or 19.7 percent, and said in a March 2009 filing that he is “principally supportive” of management.
Los Angeles-based Capital Group Cos. owns 12.3 million shares, or 10.4 percent, and fund manager Gordon Crawford called Lions Gate a “very well-run company” in an April 6 story in the Los Angeles Times. “All Carl is doing is running up legal bills, distracting management and doing nothing productive for shareholders,” the newspaper quoted Crawford as saying.
The studio, run from Santa Monica, California, amended the poison pill on April 23, allowing Icahn to vote his stake against the plan at a May 4 shareholder meeting, on the recommendation of a board committee and company advisers.
The anti-takeover plan is still structured to favor the company because it sets a March 23 record date for shareholders to vote in the special election, Icahn said in a filing.
He argued that 16.4 million shares were traded between March 24 and April 13, and that there are “reasons to expect that a significant number of Lions Gate common shares will not be voted at the special meeting.”
The studio has urged shareholders to reject Icahn’s offer.
“Unlike most shareholder rights plans in the U.S., Lions Gate’s shareholder rights plan affords significant decision- making authority to shareholders,” the company said in its April 9 release.
Lions Gate fell 19 cents to $6.99 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have gained 20 percent this year.
The plan has been supported by investment adviser Glass Lewis & Co. and Egan-Jones Proxy Service. Icahn is supported by Riskmetrics Group and Proxy Governance Inc.