Corporate raider-turned-shareholder activist Carl Icahn has definitely caught the Hollywood bug. After months of building a stake in film and TV studio Lions Gate Entertainment (LGF), which produces TV shows like Mad Men and movies like the Saw horror series, the billionaire hedge fund manager says he may seek to add nominees to the company's board. Icahn currently owns 14.28% of the company's shares, which fell sharply last week when the company announced a $93.4 million net loss on film flops like The Spirit and Transporter III.
Icahn, who has owned shares in Lions Gate for more than two years, has only begun buying up large amounts of the stock in recent weeks, spurring speculation that he was seeking to force the company, which has a large library of older films, into an acquisition. One scenario has him pushing a merger between Lions Gate and Yahoo (YHOO), of which he currently holds a 5.4% stake and sits on the board. Icahn earlier had attempted to force a merger between Yahoo and Microsoft (MSFT), hoping to build a larger search engine to take on industry leader Google (GOOG).
At Lions Gate, Icahn has yet to tip his hand as to what changes he might want. In prior filings, he said only that he believed Lions Gate shares, which have fallen by roughly 50% in the last year, to 4.54, "were undervalued" and that his representatives "have had discussions with the chief executive offer and vice-chairman" and "intend from time to time to seek to continue to have discussions." The company's stock rose 8% Feb. 23 on the news. Lions Gate had no comment, and Icahn was not available.
Registered in Canada
Changing the board at Lions Gate would be a tricky matter. The company is initially registered in Canada, which requires that the board be limited to 18 members. Of those members, at least half must be Canadian for the company to maintain the liberal tax credits for film production from that country that it now enjoys, according to officials with knowledge of the company's bylaws.
In his filing, Icahn said that he may attempt to expand the board or may seek to remove members. Further, he said he may call a special board meeting to push through his slate. Lions Gate's last annual meeting was in September 2008.