Carl Icahn's hostile offer for Lions Gate Entertainment was a premium… (Mark Lennihan / Associated…)
Activist investor Carl Icahn launched a hostile $6-a-share takeover bid Friday for Lions Gate Entertainment Corp., ratcheting up his pressure on Hollywood's biggest independent studio to change its business strategy, cut costs and halt its effort to buy Metro-Goldwyn-Mayer's film library.
Icahn also wants to remove top management and replace the board of directors with his own nominees, the first time he has sought such a change during his prolonged battle with the Santa Monica company's chief executive, Jon Feltheimer, and vice chairman, Michael Burns.
The offer was a premium of just 3 cents over the $5.97 closing price of Lions Gate stock Thursday, signaling that Icahn was unlikely to gain control.
"He's certainly not going to get the company at this price," said Matthew Harrigan, an analyst with Wunderlich Securities.
Shares closed at $6.03 on Friday after Icahn's offer was made.
However, Icahn's bid is his biggest move yet to encourage other shareholders to join him in forcing the company to slash its overhead and avoid costly acquisitions of film libraries, such as MGM's.
It also maintains the threat that he will attempt to increase his stake in Lions Gate from 18.7% to more than 20%, which could trigger a default on the studio's credit facility.
The move comes one week after Lions Gate rejected Icahn's previous bid at the same $6-a-share price to raise his holdings in the movie and television studio to nearly 30%.
"The Icahn Group's amended tender offer does not increase the price of the original offer, which the board previously determined to be financially inadequate and is not in the best interests of shareholders," Lions Gate spokesman Peter Wilkes said.
The company said it would review Icahn's takeover offer and make a recommendation to shareholders promptly.
Icahn could not be reached for comment.
The studio recently announced its intention to adopt a so-called poison pill plan that would prevent anyone from taking over more than 20% of Lions Gate by issuing more shares to other stockholders. Icahn said he would sue to block the plan from being adopted at a May 4 shareholders meeting.
Icahn's unsolicited bid came on the same day that Lions Gate was expected to make an offer for MGM.
In a statement, Icahn again criticized Lions Gate for pursuing the acquisition of debt-strapped MGM's 4,000 titles, which includes rights to the James Bond and Hobbit movie franchises.
"Lions Gate already has a major investment in a library -- its own," Icahn said in the statement. "It should be up to the shareholders to determine if they wish to more than 'double down' on another library, especially in light of the company's admitted 'substantial degree of leverage.' "
Lions Gate, with a market value of $707 million, has $825.4 million in debt, according to a recent regulatory filing. The company said it might try to raise as much as $750 million in fresh cash.
Icahn, an investor in Lions Gate since 2005, has steadily increased his stake in the studio over the last year while publicly criticizing Feltheimer and Burns for what he views as Lions Gate's excessive overhead and for what he claimed was overspending on its acquisition of the TV Guide Network last year and some bigger-budget movies.
"He is trying to lobby shareholders in the most visible way possible to convince them that his views are correct," said David Bank, an analyst with RBC Capital Markets. "That and the immediate blockage of any library acquisitions are his top priorities."
In his effort to oust board members, Icahn said he would nominate his son, Brett, along with other replacements "who more closely share our vision for the future of the company."
Persuading top shareholders to accept his offer, which expires April 30, may be difficult.
Mark Rachesky, a former ally of Icahn's who is Lions Gate's largest shareholder with 19.7% of its stock, has been supportive of current management, as has Gordon Crawford, whose Capital Research Global Investors owns 10.4%.
"If Icahn really wanted the company, he would have made a decent bid," said John Kornitzer, whose Kornitzer Capital Management owns a little less than 2% of the company's stock and is its largest bondholder. "Nobody with any brains is going to sell their stock at $6."
Unless Icahn is able to block the proposed poison pill, analysts said it's unlikely that Lions Gate management will have to make any immediate changes in strategy in response to his pressure.
"I think they go about business as usual," Bank said. "They just better not screw up."