Finally. A nasty, rock ‘em, sock ‘em proxy battle to enjoy from the sidelines. We haven’t had one of these in a long time.
I’m referring to the battle between Carl Icahn and the folks at Lions Gate Entertainment. With the deadline approaching this Wednesday for Icahn’s sixth attempt to get shareholders to accept his $7 hostile bid, both sides are now swinging wildly.
On Friday, Icahn, who owns 19 percent of the company, fired off a letter to the company, in which he referred to “the abject failure of the current management team to deliver value to shareholders,” adding, “I fear for the future of our company.”
Haunting organ music, please.
Icahn also threatened to launch a proxy fight and will try to boot out the entire board at the company’s next annual meeting. Management, of course, thinks Icahn’s offer is ridiculously low. However, they are also mindful that if Icahn’s stake exceeds 20 percent of the stock, it would trigger a “technical default” on Lions Gate’s $340 million credit facility, according to Reuters. Icahn says in a regulatory filing that if his stake exceeds 20 percent, Lions Gate could default on over $472 million of bond debt.
So far, shareholders have tendered 3.7 percent of the shares, according to Icahn. On Monday, Lions Gate came out roaring. It made public a letter urging stockholders not to tender their shares, calling Icahn’s offer “inadequate, coercive and opportunistic.”
That was just a warm-up. The company then detailed what it calls Icahn’s “long history of destroying shareholder value once he obtains control of a company or even board representation.” It cited as examples the not-so-great moments in Icahn history: WCI Communities, BKF Capital and XO Holdings. Okay. The Lions Gate felines have founded at least three investments that did poorly.
However, if that’s the best they can come up with over the 74-year-old’s 40 years of huffing and bluffing and greenmailing and flipping, their chances don’t look so good. In recent years alone, he has made big bucks on BEA Systems, and a number of casino and energy companies that he held for seven or eight years after buying them out of bankruptcy.
In 2007, Fortune magazine confirmed Icahn’s claims that he boosted the total market cap of his target companies by more than $50 billion in less than three years. Sometimes he takes control of the company, other times he gets them to find another buyer, or he pushes them into issuing a big, fat, one-time dividend and/or stock buyback.
And sometimes he realizes he must compromise. Like he did just last week, when he agreed to end his proxy fight with biotech giant Genzyme in exchange for placing two of his people on the company’s board of directors. Icahn was hoping to get four of his nominees on to the Board. Oh well.
Lions Gate is not Icahn’s sole concern now. Last month, he also announced he had an 11.9 percent stake in Hain Celestial, and a 7 percent position in Mentor Graphics. In the Mentor filing, Icahn insisted the shares of the tech company were undervalued, and that he intends “to seek to have conversations with management...to discuss the business and operations...and the maximization of shareholder value.”
On Friday, when most people were focusing on Icahn’s attack on Lions Gate, he quietly lifted his Mentor stake to 7.97 percent.
These are the types of maneuverings that have enabled Icahn to amass a net worth of $10.5 billion, making him the 59th richest person in the world, according to Forbes.
Irwin Simon, CEO of Hain Celestial, seems to understand. Last week he told CNBC: “He’s created a lot of value out there and created a lot of wealth for himself and maybe I can get a little of that too.”
Stephen Taub, who has covered the hedge fund industry for 30 years, is a contributing editor to Institutional Investor and Absolute Return-Alpha magazines.
