It looks like Lion’s Gate Entertainment has been able to thwart the latest attack in its battle with activist investor Carl Icahn. Following Icahn’s attempt to buy Lion’s Gate’s debt after failing to obtain seats on the company’s board, the mini-major film studio said in an SEC filing that it had exchanged $66.6 million of convertible debt due 2025 for new debt with more favorable conversion terms for the debt holders; the debt is now convertible into stock at $8.25/share versus the former price of $14.28/share. This means the debt holders would own more equity in Lion’s Gate if they converted their debt to equity.
In return for the more favorable terms, those bond holders that also own debt due in 2024 have agreed not to sell any in a tender offer — a move that hurts Icahn’s offer to purchase the $150 million of the studio’s debt due that year. Icahn also offered to buy all of the company’s $175 million in debt due in 2025.
Many speculate that Icahn made the tender offer for the company’s convertible debt in an attempt to gain greater control of the company through equity ownership rather than seats on the board (Lion’s Gate re-buffed the billionaires’ bid to gain seats for himself and an ally). If Icahn were to control Lion’s Gate debt and convert all of it, he would become a significant shareholder in the company — owning almost 30 percent of the equity. At the very least, the refinancing by Lion’s Gate ensures that a portion of its debt will remain out of Icahn’s grasp, — and that could make him more hesitant to follow through on his tender offer.