Lionsgate Urges Shareholders to Reject the Icahn Group's Offer and Not Tender Their Shares Recommends That Shareholders Vote For the Shareholder Rights Plan
SANTA MONICA, Calif. and VANCOUVER, British Columbia, April 21 /PRNewswire-FirstCall/ -- Lionsgate (NYSE: LGF) today announced that its Board of Directors, in consultation with its financial and legal advisors, has determined, by unanimous vote of the directors present and upon the unanimous recommendation of the Special Committee of the Board, that the unsolicited amended tender offer from Carl Icahn and certain of his affiliated entities (the "Icahn Group") to purchase up to all of the common shares of Lionsgate for U.S.$7.00 per share is financially inadequate, opportunistic and coercive and is not in the best interests of Lionsgate, its shareholders and other stakeholders.
Accordingly, the Board recommends that Lionsgate's shareholders reject the Icahn Group's offer and not tender their shares. All of Lionsgate's directors and executive officers have informed Lionsgate that they do not currently intend to tender their shares into the offer.
The basis for the Board's recommendation, which followed a thorough review of the terms and conditions of the offer by the Special Committee and the Board, is set forth in Lionsgate's amended Schedule 14D-9 filed today with the Securities and Exchange Commission (the "SEC") and notice of change to directors' circular filed with Canadian securities regulators.
"We believe that the Icahn Group's offer remains financially inadequate and does not reflect the full value of Lionsgate shares," said Lionsgate Co-Chairman and Chief Executive Officer Jon Feltheimer. "We believe that the offer pales in comparison to the value inherent in the world class platform we have established over the past ten years."
In addition to rejecting the Icahn Group's revised offer, the Board recommends that shareholders vote to approve the Shareholder Rights Plan at the Special Meeting of Shareholders to be held on May 4, 2010.
Shareholders who do not attend the Special Meeting of Shareholders can vote by submitting the WHITE proxy card they receive in the mail. To ensure that all shares are accounted for, shareholders should vote all of the WHITE cards that they receive.
Lionsgate also mailed the following letter to its shareholders concurrent with the filing of the Schedule 14D-9:
April 21, 2010
Dear Fellow Lionsgate Shareholder:
On April 15, 2010, the Icahn Group revised its unsolicited offer to acquire up to all of the common shares of Lionsgate from U.S.$6.00 per share to U.S.$7.00 per share. Your Board, in consultation with its outside financial advisors and legal advisors, reviewed the amended offer carefully and determined that it is financially inadequate. The Board believes that the offer is opportunistic and coercive and is NOT in the best interests of Lionsgate, its shareholders and other stakeholders. All of Lionsgate's directors and executive officers have informed Lionsgate that they do not currently intend to tender their shares into the offer.
In recommending that Lionsgate shareholders reject the Icahn Group's inadequate offer and not tender their shares, the Board considered, among other things, that:
THE OFFER IS FINANCIALLY INADEQUATE AND FAILS TO REFLECT THE FULL
VALUE OF YOUR INVESTMENT
THE OFFER IS OPPORTUNISTIC AND COERCIVE
1. The Offer Does Not Reflect the Full Value of the Shares
2. The Offer is Financially Inadequate
In connection with its review of the Icahn Group's amended offer made on April 15, 2010, the Special Committee of the Board received a written opinion dated April 20, 2010 from Perella Weinberg, the financial advisor to the Special Committee, to the effect that as of such date and based upon and subject to the matters stated in its opinion, the consideration to be paid in the amended offer is inadequate, from a financial point of view, to the shareholders (other than the Icahn Group and its affiliates).
3. The Icahn Group is Deliberately Seeking to Violate Lionsgate's Credit Agreements for
its Own Benefit at the Expense of All Other Shareholders
This Could Have a Material Adverse Effect on Lionsgate's Business
4. Icahn's Bridge Facility Claim is Another Opportunistic Attempt
to Gain Control of Lionsgate
5. The Icahn Group's Relative Lack of Industry Expertise and
o Blockbuster reported greater than $1.4 billion in losses;(2) and
o Blockbuster's share price declined by 96%, plummeting from $10.05 per share to
$0.40 per share.(3)
In addition, your Board is concerned at the prospect that the Icahn Group may "replace top management." Lionsgate is uniquely positioned within the industry, and we look forward to capitalizing on the world class platform the Company has established – don't surrender the value inherent in your Lionsgate investment to the Icahn Group.
6. The Timing of the Offer is Opportunistic
7. The Offer is Coercive and Highly Conditional
ICAHN CONTINUES TO FLIP FLOP ON LIONSGATE
Over the past few months, Mr. Icahn has contradicted himself regarding his intentions for Lionsgate.
Mr. Icahn changed his position with regard to Lionsgate's operations.
Mr. Icahn's flip flops and contradictory statements further demonstrate that Mr. Icahn lacks an understanding of and a coherent plan for the Company.
LIONSGATE HAS A COMPELLING GROWTH STRATEGY TO BUILD VALUE
Over the past ten years, the Board and management team have developed and executed a disciplined three-phase plan to create and build a diversified media business:
As part of this plan, the Company announced on April 19, 2010 that EPIX had signed its sixth distribution deal, a nationwide distribution agreement with DISH Network. This agreement will result in EPIX becoming available in 30 million homes beginning next month. Lionsgate also announced that on April 5, 2010 it formed an equal partnership with Saban Capital Group to operate and manage Tiger Gate, the platform for branded action and thriller/horror channels, Kix and Thrill, which are launching across Asia.
Lionsgate's business plan has been validated by the support of partners including JPMorgan's One Equity Partners in TV Guide Network, Comcast and Sony in FEARnet, Viacom and MGM in EPIX, Saban Capital Group in Tiger Gate and StudioCanal in Lionsgate's international businesses.
As part of its disciplined growth plan and in an effort to generate the most value for shareholders, the Company manages overhead carefully. Overhead in its core businesses was reduced in fiscal 2010, and the Company's 8.5% overhead to corporate revenue percentage is one of the lowest in the industry. For fiscal 2011, the budgeted percentage is 7.8%.
LIONSGATE HAS THE RIGHT LEADERSHIP IN PLACE
Since the beginning of 2000, when the current management team joined the Company:
LIONSGATE IS WELL POSITIONED TO OUTPERFORM
Lionsgate is well positioned to continue to outperform and deliver value to its shareholders by taking advantage of its world-class media platform which leverages creation, production and distribution across diverse channels:
PROTECT THE VALUE OF YOUR INVESTMENT IN LIONSGATE
VOTE FOR THE SHAREHOLDER RIGHTS PLAN
Lionsgate's May 4, 2010 Special Meeting of Shareholders is less than two weeks away and your support to confirm the Shareholder Rights Plan is critical to protecting the value of your investment in the Company.
Lionsgate's Shareholder Rights Plan was implemented to ensure that:
The Shareholder Rights Plan your Board is recommending does not prevent change of control transactions. By design, the Shareholder Rights Plan does not prevent or restrict a proxy challenge, but deters inadequate, opportunistic and coercive offers, such as the offer by the Icahn Group.
Glass Lewis, a Leading Proxy Advisory Firm, Believes Lionsgate's Shareholder Rights Plan
Is in Best Interest of Shareholders
In its report released on April 8, 2010, leading proxy advisory firm Glass Lewis & Co., said of Lionsgate's Shareholder Rights Plan, "The permitted bid provisions adequately ensure that shareholders are able to consider a reasonable offer for the Company. Further, we note that the Rights Plan will expire in three years. In light of these shareholder-friendly provisions, we believe that the Rights Plan may serve to protect shareholders in the event that a takeover bid does not reflect the full value of the Company's shares or is coercive. Consequently, we believe that shareholder ratification of the Company's Rights Plan is in shareholders' best interests."(10)
The Board believes that the Shareholder Rights Plan is in the best interests of the Company, its shareholders and other stakeholders and recommends that you vote FOR the Shareholder Rights Plan on the WHITE Proxy Card. The Board also urges shareholders to discard any gold proxy card that they receive from the Icahn Group.
PROTECT THE VALUE OF YOUR INVESTMENT IN LIONSGATE
REJECT THE ICAHN GROUP'S INADEQUATE OFFER AND
VOTE FOR THE SHAREHOLDER RIGHTS PLAN ON THE WHITE PROXY CARD
Lionsgate is a strong and diversified Company with a proven strategy to generate value for our shareholders. We are confident we can better serve our shareholders by continuing to execute our strategic plan.
Your Board strongly recommends that you reject the Icahn Group's financially inadequate offer by not tendering your shares.
Your vote is extremely important. The Board recommends that you vote FOR Lionsgate's Shareholder Rights Plan on the WHITE proxy card. We urge you to discard any gold proxy card you receive from the Icahn Group.
Since time is short, vote the WHITE proxy card by phone or internet.
We have appreciated and look forward to your continued support.
/s/ Jon Feltheimer
/s/ Michael Burns
Co−Chairman and Chief Executive Officer
If you have any questions, require assistance in voting your shares, or need
additional copies of Lionsgate's proxy materials, please call MacKenzie Partners
at the phone numbers listed below.
105 Madison Avenue
New York, NY 10016
(212) 929-5500 (call collect)
TOLL-FREE (800) 322-2885
Perella Weinberg Partners LP is serving as financial advisor to the Special Committee of the Lionsgate Board of Directors and Wachtell, Lipton, Rosen & Katz is serving as U.S. legal advisor and Goodmans LLP is serving as Canadian legal advisor. Morgan Stanley & Co. Incorporated is serving as financial advisor to Lionsgate and Heenan Blaikie LLP is serving as legal advisor.
(1) Based on S&P 500 Media Index. From February 12, 2010 - April 20, 2010. Source: Bloomberg.
(2) Based on Net income (loss) for second half 2005, 2006, 2007, 2008 and 2009 per Blockbuster filings.
(3) Based on Class A common stock. Icahn was elected to the board on May 11, 2005 and resigned on January 28, 2010.
(4)CNBC, "National Programming," February 18, 2010.
(5) Carl C. Icahn (April 15, 2010). "Icahn Announces Increase in Tender Offer Price for Common Shares of Lions Gate Entertainment Corp." Press release.
(6) CNBC, "National Programming," February 18, 2010.
(7) CNBC, "Fast Money," March 24, 2010.
(8) From January 1, 2000 - April 20, 2010. Source: Bloomberg.
(9) See GAAP reconciliation chart on page 10.
(10) Permission to use this quote was neither sought nor received.
Lionsgate (NYSE: LGF - News) is the leading next generation studio with a strong and diversified presence in the production and distribution of motion pictures, television programming, home entertainment, family entertainment, video-on-demand and digitally delivered content. The Company has built a strong television presence in production of prime time cable and broadcast network series, distribution and syndication of programming through Debmar-Mercury and an array of channel assets. Lionsgate currently has nearly 20 shows on 10 different networks spanning its prime time production, distribution and syndication businesses, including such critically-acclaimed hits as "Mad Men," "Weeds" and "Nurse Jackie" along with new series such as "Blue Mountain State" and the syndication successes "Tyler Perry's House of Payne," its spinoff "Meet The Browns" and "The Wendy Williams Show."
Its feature film business has generated such recent hits as TYLER PERRY'S WHY DID I GET MARRIED TOO? and the critically-acclaimed PRECIOUS, which has garnered nearly $50 million at the North American box office and won two Academy Awards(R). The Company's home entertainment business has grown to more than 7% market share and is an industry leader in box office-to-DVD revenue conversion rate. Lionsgate handles a prestigious and prolific library of approximately 12,000 motion picture and television titles that is an important source of recurring revenue and serves as the foundation for the growth of the Company's core businesses. The Lionsgate brand remains synonymous with original, daring, quality entertainment in markets around the world.
Free Cash Flow Target Reconciliation to GAAP Cash Flow from Operating Activities
2013 to 2015
Range of Net Cash Flows Provided by (Used In) Operating Activities
Purchases of Property and Equipment
Net Borrowing Under and (Repayment) of Production
Range of Free Cash Flow, as Defined
Free cash flow is defined as net cash flows provided by operating activities, less purchases of property and equipment and plus or minus the net increase or decrease in production obligations.
Free cash flow is a non-GAAP financial measure.
This communication does not constitute an offer to buy or solicitation of an offer to sell any securities. Lionsgate has filed and amended a Solicitation/Recommendation Statement on Schedule 14D-9 with the Securities and Exchange Commission (the "SEC") and a notice of change to directors' circular with Canadian securities regulators. Any Solicitation/Recommendation Statement and directors' circular or amendment thereto filed by Lionsgate that is required to be mailed to shareholders will be mailed to shareholders of Lionsgate. In addition, Lionsgate has filed a proxy statement with the SEC and Canadian securities regulators in connection with the special meeting of shareholders and mailed such proxy statement to shareholders of Lionsgate. SHAREHOLDERS ARE STRONGLY ENCOURAGED TO READ THESE AND OTHER DOCUMENTS FILED WITH THE SEC OR CANADIAN SECURITIES REGULATORS IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE, AS THEY WILL CONTAIN CERTAIN IMPORTANT INFORMATION. Shareholders will be able to obtain the Solicitation/Recommendation Statement, the directors' circular, any amendments or supplements thereto, the proxy statement, and other documents filed by Lionsgate with the SEC and Canadian securities regulators related to the Icahn Group's unsolicited tender offer for no charge in the "Investors" section of Lionsgate's website at www.lionsgate.com or at the SEC's website at www.sec.gov or at www.sedar.com. Copies will also be available at no charge by writing to Lionsgate at 2700 Colorado Avenue, Suite 200, Santa Monica, California 90404.
Certain Information Regarding Participants
Lionsgate and certain of its directors and executive officers may be deemed to be participants under the rules of the SEC. Shareholders may obtain information regarding the names, affiliations and interests of Lionsgate's directors and executive officers in Lionsgate's Annual Report on Form 10-K filed with the SEC on June 1, 2009, as updated in Exhibit 99.1 to Lionsgate's Current Report on Form 8-K filed with the SEC on October 13, 2009, and its proxy statement for the 2009 Annual Meeting filed with the SEC on August 17, 2009. To the extent that holders of Lionsgate securities have changed since the amounts printed in the proxy statement for the 2009 Annual Meeting, such changes have been or will be reflected on Statements of Change in Ownership on Form 4 filed with the SEC. Additional information regarding the interests of these participants in any proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, are included in the definitive proxy statement filed with the SEC and Canadian securities regulators in connection with the special meeting of shareholders and may also be included in other relevant materials to be filed with the SEC if and when they become available. These documents (when available) can be obtained free of charge from the sources indicated above.
Certain statements in this press release may constitute "forward-looking" statements. Forward-looking statements are based upon assumptions as to future events that may not prove to be accurate. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Actual outcomes and results may differ materially from what is expressed or forecasted in these forward-looking statements as a result of various important factors, including, but not limited to, actions taken by the Icahn Group, actions taken by shareholders in respect of the offer, the possible effect of the offer on Lionsgate's business (including, without limitation, on Lionsgate's credit facilities and notes), the substantial investment of capital required to produce and market films and television series, increased costs for producing and marketing feature films, budget overruns, limitations imposed by Lionsgate's credit facilities, unpredictability of the commercial success of Lionsgate's motion pictures and television programming, the cost of defending Lionsgate's intellectual property, difficulties in integrating acquired businesses, technological changes and other trends affecting the entertainment industry, and the risk factors found under the heading "Risk Factors" in Lionsgate's 2009 Annual Report on Form 10-K filed with the SEC on June 1, 2009, as updated in Exhibit 99.1 to Lionsgate's Current Report on Form 8-K filed with the SEC on October 13, 2009, and Lionsgate's Quarterly Report on Form 10-Q for the quarter ended December 31, 2009 filed with the SEC on February 9, 2010. As a result, these statements speak only as of the date they were made and Lionsgate undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless such updates or revisions are required by applicable law. Words such as "expects," "intends," "plans," "projects," "believes," "estimates," "forecasts" and similar expressions are used to identify these forward-looking statements.
Peter D. Wilkes
Andrea Priest / Annabelle Rinehart
Joele Frank, Wilkinson Brimmer Katcher