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Lionsgate vs. Icahn Battle Drags Out Further

Carl Icahn
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Carl Icahn

Carl Icahn's push to take over Lionsgate is getting dragged out even further.

Today he announced he's extended his $7 a share tender offer for Lionsgate—for the third time. Instead of expiring this evening, his tender offer will now expire at 8 pm on June 1. This comes just days after Lionsgate and Icahn sat down for talks on alternative options, talks that don't seem to have gone anywhere.

Icahn's $7 per share plan doesn't seem to be going anywhere either—hence they 3rd extension of the tender offer. In today's release Icahn revealed that as of noon eastern on Friday approx 4.66 million shares (some 4 percent) of Lionsgate were tendered and not withdrawn. Just two weeks ago Icahn reported that about 7 million shares, (6.3 percent) were tendered. Not only does Icahn have far fewer shares than he needs, but he has less support now than he did two weeks ago.

What now? Icahn could lower his minimum requirement or raise his share offer. Or, he could negotiate with Lionsgate for representation on the company's board—he does after all own over 18% of shares. But for now he's focusing on drawing more shareholder support by criticizing Lionsgate management.

In today's statement "Mr. Icahn stated: "We find reprehensible Lions Gate's recent announcement regarding the board's approval of the establishment of a trust that would hold approximately $16 million in cash to fund severance obligations that would purportedly be due to members of senior management should their employment be terminated without "cause" in connection with a "change in control". We believe this latest action, together with the board's failed and misguided attempts to implement a poison pill and its reckless retention (at enormous expense to shareholders - with no discernible benefit) of no less than six professional advisory firms (two financial advisors, three law firms and a public relations firm) to defend against our offer, shows just how far removed this board has become from its mission of holding management accountable and safeguarding the interests of shareholders....

What about that $16 million Lionsgate set aside?

This would indicate that Lionsgate management is scared, which seems odd, considering how few shares were tendered to Icahn's offer. But in a true hostile situation like this one, setting aside cash for severance is far from unusual. If Icahn were to raise his bid and take over the company, Lionsgate's board wants insurance that he won't refuse to honor management contracts.

We'll be watching this ongoing battle. At this point resolution seems much less likely to come from response to the tender offer, and much more likely to come from talks between the two sides.

Questions? Comments? MediaMoney@cnbc.com

  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.