Icahn on verge of becoming Lionsgate’s largest shareholder

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With the deadline of his $7 dollar per share tender offer just hours away, it looks as if Carl Icahn will become Lionsgate Entertainment’s largest shareholder with a more than 30% stake in the film and TV studio. The stage is now set for him to launch his proxy war to seize control of Lionsgate’s board.

The activist investor has so far received 12.5% of Lionsgate’s outstanding shares, which if tendered by the time his offer expires at 5 p.m. Pacific time, would put his holdings at about 31%, according to a person familiar with the matter. If Icahn gains another 2% between now and June 30, the period during which other stakeholders have an opportunity to also tender their shares, the investor would assume veto power over any mergers and acquisitions attempted by management.

Also, if Icahn’s stake climbs to 33%, it would trigger a change of control provision in the employment contracts of senior management. While that would enable Chief Executive Jon Feltheimer and Vice Chairman Michael Burns to leave with multimillion-dollar payouts, neither is expected to walk away from the company voluntarily, said a person close to the situation.

Because Icahn’s holdings will now exceed 20%, a default is automatoically triggered under the convenants of Lionsgate’s revolving credit facility, which could accelerate the payment of the company’s $476 in debt. However, Lionsgate is expected to be granted a waiver from its lead bank, JPMorgan Chase, within the next day or so, according to that same person.

In a letter to Lionsgate shareholders earlier this week, Feltheimer and Burns said, ‘we are confident that the Icahn Group will not obtain control of Lionsgate.’ Both executives declined to comment on Wednesday. Icahn could not immediately be reached for comment. -- Claudia Eller