Icahn Files Tender Offer For Lionsgate's Debt

As promised, Carl Icahn finally filed his tender offer to purchase $325 million of Lionsgate’s debt today. The full, 25-page “offer to purchase” document is available here.

But here are some of the highlights:

He’s seeking to buy all of Lionsgate’s senior notes due in 2024 and 2025 for the same price he originally proposed: $750 for each $1,000 of the 2024 notes (worth $150 million) and $730 for each $1,000 of the 2025 notes (worth $175 millon).

The offer expires at 5 p.m. Eastern time a month from today (April 20, 2009), unless Icahn himself withdraws or extends the offer. If he chooses to extend the offer, the filing notes, he will “make a public announcement of the extension by issuing a press release prior to 9 a.m., New York City, time on the next business day after the scheduled Expiration Time.” This conceivably means that Icahn could wait for the offer to expire at 5 p.m. on 4/20 and then issue a press release extending the offer before 9 a.m. the next morning.

Icahn has the right to withdraw or extend the offer unless the following conditions are satisfied or waived by Carl himself (emphasis ours):

(a)                                  no preliminary or permanent injunction or other order of any domestic or foreign court, government or governmental authority or agency shall have been issued and shall remain in effect which:


(i)                                   makes illegal, delays or otherwise directly or indirectly restrains or prohibits the making of the Offer or the acceptance for payment, purchase of or payment for any Notes by the Offeror;


(ii)                                imposes or confirms limitations on the ability of the Offeror effectively to exercise full rights of ownership of any Notes, including, without limitation, the right to vote any Notes acquired by the Offeror;


(iii)                             imposes or confirms limitations on the ability of the Offeror to fully exercise the voting rights conferred pursuant to its appointment as proxy in respect of all deposited Notes which it accepts for payment and pays for; or


(iv)                            requires divestiture by the Offeror of any Notes;


(b)                                 there shall not be any action taken or investigation or demand, or any statute, rule, regulation or order proposed, enacted, enforced, promulgated, issued or deemed applicable to the Offer, by any domestic or foreign court, government or governmental authority or agency, in any jurisdiction, which might, directly or indirectly, result in any of the consequences referred to in paragraph (a) above or require a filing with or approval by any governmental authority;


(c)                                  no change or development shall have occurred or been threatened since the date of the Offer in the business, properties, assets, liabilities, financial condition, operations, results of operations, or prospects of Lions Gate Parent or Lions Gate which either:


(x)                                   is outside the ordinary course of the business of Lions Gate Parent or Lions Gate; or


(y)                                 may be materially adverse to Lions Gate Parent or Lions Gate;


nor shall the Offeror have become aware of any fact since the date of the Offer that has not been Publicly Disclosed prior to the date of the Offer by Lions Gate Parent or Lions Gate, that has or may have a material adverse effect on the value of the Notes;


(d)                                 no action or proceeding before, or demand by, any domestic or foreign court or governmental agency or authority or other regulatory or administrative agency or commission shall have been threatened, instituted or pending by any Person challenging the acquisition of any Notes pursuant to the Offer or otherwise directly or indirectly relating to the Offer which, in the reasonable judgment of the Offeror, adversely affects the Offeror or the Noteholders, or causes, may cause, or if successful would cause, any material diminution of the benefits to be derived by the Offeror as a result of the Offer or the acquisition of the Notes anticipated to be acquired through the Offer;


(e)                                  neither Lions Gate Parent nor Lions Gate shall have:


(i)                                     issued or authorised or proposed or agreed to, the issuance or incurrence of, any additional equity or debt securities (other than pursuant to any currently outstanding options or other rights to acquire securities or indebtedness that have been Publicly Disclosed by Lions Gate or Lions Gate Parent prior to the date of the Offer) or indebtedness for borrowed money (other than under the Revolving Credit Agreement); or



(ii)                                 declared or paid any distribution on the Notes or any payment or distribution on any of its other securities or indebtedness (other than regularly scheduled interest in accordance with the terms of the Notes or other indebtedness and payments under the Revolving Credit Agreement); and


(f)                                    neither the Lions Gate Entities, nor their boards of directors, nor any governing body thereof shall have authorised, proposed, declared or announced its intention to propose any:


(x)                                  change to its articles or certificate of incorporation or bylaws; or


(y)                                any merger, consolidation or business combination or reorganization transaction, acquisition of assets, disposition of assets or material change in its capitalisation, or any comparable event not in the ordinary course of business, other than any of the foregoing that have been Publicly Disclosed by Lions Gate or Lions Gate Parent prior to the date of the Offer (such as the acquisition of the TV Guide Network and TV Guide Online properties from Macrovision Solutions Corporation); or


(z)                                  any change to the terms of the Notes.

Indeed, by making this offer, Icahn has given himself a lot of control over his dealings with Lionsgate. He specified the terms the studio has to agree to in order to sell its debt to him. Unlike in the board negotiations last week, in which Lionsgate was asking Icahn to agree to their terms, Carl is calling the shots here. He’s in control of what’s becoming a particularly hostile takeover attempt.

Furthermore, as illustrated by the passages we bolded, Icahn wants to make sure he’s getting a good deal and won’t buy the notes if anything happens to the company that he’s unaware of during the offer period that could affect their value. He also seems to be forbidding Lionsgate from engaging in any merger or reorganization while his offer’s out, which is interesting, since a weak but plausible theory proposed after Icahn announced his intention was that Lionsgate could try to merge with another studio to ward off the corporate raider. Not any more.

He also states in the offer that he already owns $1 million, or 0.67% of the 2024 notes which he bought because he believed they were “a good investment.” He also confirms what many believed to be his reason for acquiring Lionsgate’s debt, as opposed to more equity, in the first place by stating that he believes the purchase of the notes “represents an opportunity to increase [his] investment in the debt of Lions Gate” with limited risk.”

Finally, he says he reserves the right “to dispose of any or all of [his] Notes in the open market,” “to acquire additional Notes in the open market,” and “to engage in any hedging or similar transactions with respect to the Notes,” suggesting that he may ultimately convert them into equity as analysts have predicted he intends to do.

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