Lionsgate Adopts Poison Pill

SANTA MONICA/VANCOUVER: Lionsgate has announced the adoption of a Shareholder Rights Plan following Carl Icahn’s tender offer that upped his stake in the independent studio to just under 34 percent.

Lionsgate said that the plan is "designed to encourage the fair and equal treatment of Lionsgate’s shareholders in connection with any initiative to acquire effective control of the company."

The poison pill in intended to prevent a significant shareholder—Icahn is now Lionsgate’s biggest individual stakeholder—from making a "creeping bid," such as private agreement purchases at a premium to market prices from a small number of shareholders. The rights plan is also intended to ensure that, if there is another tender offer, the board has enough time to "explore and develop alternatives for maximizing shareholder value, to provide adequate time for competing transactions to emerge and to ensure that shareholders have an equal opportunity to participate in such a bid."

Under the plan, one share purchase right will be issued and attached to each outstanding common share of Lionsgate as of the close of business on July 12, 2010. The rights will become exercisable if a shareholder’s stake reaches 38 percent. At that point, other shareholders would be entitled to purchase Lionsgate common shares at a substantial discount to the prevailing market price.

While Icahn’s tender offer failed to secure a majority interest, his 34 percent stake does give him veto power over major transactions such as acquisitions or asset sales.

He has announced his intention to wage a proxy battle in order to replace the board of directors, but reports indicate that he has been in discussions with Lionsgate’s execs in an attempt to reach an agreement.