Score this another victory for Carl Icahn.
Although Lions Gate vowed not to give in to the legendary corporate raider cum hedge fund manager, and the firmed entertainment company ridiculed the septuagenarian for failing to gather enough shares in numerous attempts to take control of the company, it finally blinked.
Last week, the company announced it would merger with Metro-Goldwyn-Mayer Studios, the financially struggling company. Icahn, who said he also owns significant debt of MGM, immediately gave the deal his blessing. “We believe that this combination of Lions Gate and MGM would enhance value for all constituencies,” Icahn said in a statement.
Lions Gate’s stock now trades around $7.44 a share, which just so happens to be just six cents below Icahn’s highest offer for the company, which had repeatedly rejected Icahn’s offers over the past six months.
The stock market has clearly vindicated the 74-year-old investor. Now, Icahn is already stirring up another pot.
On Tuesday, he announced in a regulatory filing he had taken a 9.95 percent stake in Dynegy, the energy and utility company that in August agreed to be acquired by private equity giant Blackstone for $4.50 per share in cash. Seneca Capital separately bought nearly 10 percent of Dynegy’s stock.
As part of its Dynegy deal, Blackstone worked out a separate transaction whereby NRG Energy will acquire four natural gas-fired assets currently owned by Dynegy for $1.36 billion.
Icahn, however, does not like the deal, asserting in the filing he does not believe “the consideration agreed to in the proposed merger is adequate.” In other words, he wants Blackstone to cough up more dough.
Already, shares of Dynegy are up to $4.88, suggesting investors expect a higher offer from Blackstone or another party. This is also roughly the average amount that Icahn paid for his shares from September 27 through September 30.
Icahn’s move is seemingly upsetting a grand plan by Blackstone. The Wall Street Journal figures Blackstone could use the proceeds from the sale to NRG to repay itself the $543 million equity investment and refinance an outstanding $68 million loan at Dynegy. This would result in a balance of $750 million that Blackstone could use to pay itself a hefty dividend.
Blackstone, however, knows better than to underestimate Icahn’s resolve. And it just may have to settle for a much smaller dividend, at the very least.
Ironically, the same day Icahn disclosed his Dynegy stake, Pfizer announced it will buy King Pharmaceuticals for $14.25 a share.
You may recall that several years ago Icahn was able to block King’s deal to be acquired by Mylan Laboratories for $16.49. At that time, Icahn was a shareholder of Mylan, whose stock had slumped on the takeover news.
I’m sure long-time King shareholders who had to settle for much less money remember Icahn.
