Facing Recession And Carl Icahn: Lionsgate Cuts Jobs
CNBC Media and Entertainment Reporter
Being an independent studio rather than part of a media conglomerate, isn't helping Lionsgate avoid pink slips. The movie studio announced Friday that it's cutting 45 jobs, about eight percent of its staff. This should help generate as much as $20 million in savings, bringing the company's annual operating costs to about $120 million. These cuts are in line with those at other studios, but Lionsgate is in a unique position: last month it reported a $93.4 million quarterly loss, and it's facing a potential hostile takeover.
Billionaire corporate raider Carl Icahn is breathing down Lionsgate's neck.
Icahn, who owns 14.5 percent of the company's stock pushed, unsuccessfully, for two seats on the company's board and most recently made an offer for $350 million of the company's debt. Just yesterday afternoon Lionsgate's board issued a press release that "strongly urges note holders to consider all aspects of Icahn's offer carefully." So perhaps the layoffs aren't just about the recession.
Lionsgate says it remains neutral toward Icahn's unsolicited debt tender offer, but it certainly seems the company sees Icahn as a threat. The press release spells out that if Icahn does indeed buy the proposed debt, then he would double his equity stake in the company to nearly 30 percent, putting the company's credit facility at risk of default.
We'll see how debt holders react to Icahn's offer. And we'll see if rumors that Lionsgate is going to make a deal with hedge fund-backed film financier Relativity Media, are true. Relativity co-financed Lionsgate's "310 to Yuma" and "Bank Job." Relativity could provide Lionsgate with equity to make big studio-style movies without the big studio risk.
We'll see if that hedging satisfies Icahn's concerns about the company.
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