Lions Gate Declares Victory; Not So Fast

The folks at Lions Gate Entertainment are getting pretty giddy. After Carl Icahn reported he now owns 32 percent of the movie studio after his latest tender offer deadline passed on Wednesday, management fired off a press release declaring victory, asserting: “Once again, Lionsgate’s shareholders have spoken in support of the Board and management’s strategy to create value.”

Apparently, the company still does not realize what many others in Corporate America have known for decades: Never underestimate the resolve of Carl Icahn, even if he is now 74 years old.

Leading up to this week, management at the movie studio has repeatedly ridiculed the billionaire corporate raider cum hedge fund manager for needing to extend his tender offer four times, proudly boasting that his investors know better not to give up their stock to a guy with a questionable background.

They maintained this strategy on Thursday after Icahn disclosed that he is now extending his offer to June 30 in his bid to acquire a majority of the shares. “Four months have passed since the Icahn Group announced its intention to make a tender offer, and after repeated extensions, numerous changes to its tender offer and a barrage of unwarranted attacks on the Company, including personal attacks on the Board and management, the Icahn Group remains a minority shareholder,” management boasted, seemingly lighting up the proverbial victory cigar. “We at Lionsgate want to take this opportunity to thank our shareholders for their continued support.

In fact, on Thursday the stock closed at $7.12, above Icahn’s offering price. This might suggest Icahn — or someone else — may weigh in with an even higher offering price.

Management also played down the significance of Icahn exceeding the magic 20 percent threshold, which put the company into “technical default” on its credit facility, which Icahn says exceeds $472 million.

The company Thursday asserted it is engaged in ”advanced discussions” with its lenders regarding finalization of a waiver or amendment that will prevent the potential event of default. “Based on conversations to date, Lionsgate is highly confident that it will obtain that waiver or amendment shortly,” it added.

Meanwhile, Icahn is moving forward with plans to put up his own slate of directors in a proxy fight at Lions Gate’s next annual meeting, which has not yet been scheduled.

If Lions Gate management thinks Icahn will soon walk away with his head down looking for someone else to bully, they ought to do an extensive Google search.

My bet: Before the annual meeting is set and the proxy is printed, Lions Gate blinks and there is a settlement, just as Genzyme recently did when it agreed to give Icahn two seats on its board in exchange for Icahn dropping his proxy fight there.

Stephen Taub, who has covered the hedge fund industry for 30 years, is a contributing editor to Institutional Investor and Absolute Return-Alphamagazines.