Icahn Issues Open Letter to Lionsgate Shareholders

NEW YORK: Carl Icahn, in an open letter, says Lionsgate’s board has "failed shareholders"; in its response, the studio asserts that the billionaire financier trying to take control of the company is "simply attempting to distract shareholders from the obvious—his offer price is woefully inadequate." 

Icahn’s open letter to Lionsgate follows the company’s rejection of his $6/share hostile takeover bid. Opening the letter, Icahn referenced Jon Feltheimer’s statement that the company has exhibited a "patient, disciplined strategy of building a strong and diversified company step by step over the past 10 years." The statement, Icahn said, "is absurd. In actuality, most of the stock’s appreciation during the decade was the result of one transaction—the acquisition of Artisan."

Icahn continues: "You claim that I offer no "meaningful vision", thereby implying that you have one. I cannot help but wonder why your "vision"—if so "meaningful"—never translated into shareholder value? I believe that one of my strongest traits as an investor is that I don’t personally claim to be a visionary in regard to any particular industry. I believe in finding strong managers and holding them accountable. If the stock price of a company remains stagnant for years, as it has with Lions Gate, then clearly something is wrong. I suggest that your directors have failed shareholders. They have never taken a long hard look at this "meaningful vision" you claim to possess and have not been willing to hold you accountable for it. Instead, they have rewarded you and the rest of management with bonuses, options and golden parachutes while your shareholders have watched their stock decline."

The letter goes on to say: "I continue to fear (as I have previously expressed) that the current board will allow you to borrow billions to pursue your new "vision" of library consolidation, exhibited by your interest in acquiring MGM and Miramax. This is simply another delusion in my opinion, as library values are currently in a secular decline, never to return to cash flows seen during the heyday of DVD sales."

He concludes: "The road to bankruptcy is littered with companies whose CEOs—under the banner of "vision"—have been permitted by lax board oversight to gamble their companies into oblivion."

Lionsgate responded quickly, accusing Icahn "attempting to distract shareholders rom the obvious–his offer price is woefully inadequate." The statement listed the studio’s achievements over the past decade, and said that Icahn "has repeatedly changed his stance on Lionsgate and his intentions with regard to the company. Lionsgate claims that last year, Icahn discussed the possible acquisition of MGM and "his potential participation in providing financing for the transaction. Now he is openly criticizing Lionsgate for its interest in acquiring libraries." Moreover, Lionsgate says, Icahn was previously critical of the acquistions of TV Guide Network and TVGuide.com and has since reversed his stance.
 
"Lionsgate is a strong and diversified company with a proven strategy to generate value for our shareholders," the company said. "We are confident we can better serve our shareholders by continuing to execute our strategic business plan."