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Lions Gate Entertainment presents a how-to guide to eBay and anyone else engaged with the aged corporate raider: Keep exactly as many generously-termed convertible bonds around to hand off to a “friendly shareholder” in your hour of greatest need and any unwanted attentions can be vanquished. Sure, you might have to pony up a few million dollars and accept a slap on the wrist if anyone should find out, but you’ll get to keep your company.
Mr. Burns began discussions with another director, labeled the “Friendly Director” by the SEC, about buying this noteholder’s newly minted holdings. The “friendly director” was Mark Rachesky, who had previously worked for Mr. Icahn but had allied himself with Lions Gate.
As this was going on, Mr. Icahn and the board of Lions Gate agreed to a 10-day standstill while the company sought a potential deal with a rival film studio, reported to be Metro-Goldwyn-Mayer Inc….
As talks with MGM collapsed, the standstill was about to end and Mr. Icahn was planning a new tender offer. The SEC said the board was ready. Lions Gate scheduled a meeting of its special board committee for one minute after midnight, as the standstill expired, and the entire board met immediately after that.
At the meeting the board approved the plan to convert the noteholder’s notes to more attractive prices, even agreeing to lower the conversion price further at the request of Mr. Rachesky. It also approved a change to its insider-trading rules that would allow the Mr. Rachesky to convert his notes to shares immediately. The transaction went through, giving Mr. Rachesky about 16 million more shares for a total stake of 28.9%, up from 19.9%, and diluting Mr. Icahn to 33.5% from 37.9%.
At the company’s annual meeting, Mr. Icahn’s slate was defeated. One of his nominees lost by 16 million shares–the number of shares Mr. Rachesky got in the conversion.
How Lions Gate Defeated Carl Icahn [WSJ MoneyBeat blog]
Lions Gate admits fault over Icahn hostile bid in SEC pact [Reuters]
Lions Gate Is Fined for Fending Off Carl Icahn’s Attentions [DealBook]