Carl Icahn bid for Lions Gate bonds is a bust, extends offer

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After getting a frosty response from bondholders to his bid to buy up Lions Gate’s convertible debt, activist shareholder Carl Icahn has extended his tender offer to May 1.

Icahn’s offer, which expired Monday afternoon, attracted only $8.9 million worth of bonds, or about 2.8% of $316 million in total outstanding debt. The billionaire investor, who owns 14.5% of Lions Gate common stock and has been critical of the management of the Santa Monica movie and TV studio, blamed the bid’s underwhelming reception on the company’s last-minute deal with two bondholders to exchange their notes for new bonds at a lower strike price.

‘I believe Lions Gate’s ‘refinancing exchange agreement’ -- which favors a select few bondholders at the expense of all shareholders and the other bondholders -- may have confused some bondholders. We are therefore extending our offer,’ Icahn said in a filing with the Securities and Exchange Commission on Tuesday.

Icahn wasn’t available to comment.

But some on Wall Street saw the corporate raider’s remarks as little more than classic spin.

‘That’s his PR twist,’ said Alan Gould, a New York-based media analyst with Natixis Bleichroeder Inc. ‘I don’t think the price he was offering was that much better than what the bonds are trading at.’ The terms of Icahn’s extended offer remain the same.

Gould said unless a bondholder needed immediate cash, there would be no reason to sell to Icahn.

‘If you held the bonds instead of tendering to Icahn, you’re holding paper that has a 13% annual return,’ said Gould. One of the two issues of bonds, which can be put to Lions Gate in the fall of 2011, would get a 13.4% return, while the other, with a March 2012 put date, would earn a 12.9% annualized return, Gould noted. A ‘put’ is when a seller can force a buyer to purchase his bond or stock.

So, what does Icahn get by extending his offer for another nine business days?

‘I don’t think it’s going to get him a heck of a lot,’ said Gould. But, he added, ‘it’s a reminder to Lions Gate’s management that he’s there. ... Icahn doesn’t give up easily. I’m sure there will be a further move.’

There’s no doubt about that.

-- Claudia Eller

Photo Credit: Mark Lennihan/Associated Press