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Wednesday
18Mar2009

Billionaire Icahn Unveils Lionsgate Debt Proposal

DateWednesday, March 18, 2009 at 2:13AM
On Tuesday, investor and corporate swashbuckler Carl Icahn revealed the specifics of his recent proposal to clean out $325 million worth of debt at Lionsgate, the studio behind the Saw and Tyler Perry movies, and a company in which Icahn has increased his ownership stake from 3% to just under 15% in a year. Variety reports that the deal is above the market value, given all of those considerations, but below face value of the notes he's be acquiring.

We've been following the fate of Lionsgate, which has given new meaning to the phrase, "spending money like there's no tomorrow," even after a dismal fourth quarter led Wall Street analysts to warn buyers away from the film studio. But there has been no warning Lionsgate, which has gone from questionable move to questionable move ever since, buying the virtually extinct TV Guide Network for $250 million, watching longtime CEO Tom Ortenberg walk across the street to another studio, and flirting with buying Summit Entertainment - all in the last three months.

"The specifics of Icahn's offer are as follows," writes Variety. "75¢ on the dollar for $150 million of 2.94% convertible senior subordinated notes due in 2024, and 73¢ on the dollar for $175 million of 3.63% convertible senior subordinated notes due in 2025."

Those numbers are hard to grasp if you don't follow that sort of lingo, but essentially, Icahn would buy a greater interest in the company at discounted prices to wipe out some of the studio's accrued debt. And that would give Icahn more control over Lionsgate's business, which he says is mired in way too much overhead. There is also a potential power play to install his son on the board. If he converts the convertible notes into equity, Icahn would control nearly 30% of the company.

Not going quietly, Lionsgate has hired banking firms and lawyers to protect itself should Icahn step up his game. He's pretty experienced in these corporate takeovers, so if he wants it badly enough, he'll either get it or Lionsgate will be exhausted by the process. Wall Street seemed to love today's news, though, as Lionsgate's stock went up 8%.

AuthorColin Boyd | | in | Print ArticlePrint Article | | CommentPost a Comment |

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