Icahn Offers to Buy Lions Gate Debt at Premium

Billionaire investor Carl Icahn on Tuesday has priced his offer to buy up to $325 million in debt owed by Lions Gate Entertainment Corp., a move that could increase his influence over the boutique movie studio.

Icahn has amassed 14.5 percent of the company's shares and his offer last week to buy up convertible bonds was seen by some analysts as a way of gaining leverage over the company's board.

On Tuesday, Icahn named his price at around 75 cents per dollar on the face value of the debt, which had been trading in the high 50-cent range last week before his offer was announced.

Talks between Icahn and the company's directors broke down last week after Icahn pushed to pick his own members of the board but refused to agree to a "standstill agreement" that would keep him from adding to his stake.

The bonds could boost his stake to about 30 percent if converted into common shares.

But the conversion rates — $14.28 per share on one set of notes and $11.50 per share on another batch — make it unprofitable to do so because they are now trading around $5 on the open market.

The quest to buy the outstanding bonds puts increasing pressure on the board, which has declined to give in to several of his demands.

"In this game of chess, this is certainly a move which enhances his offensive position," said Barry Genkin, a senior partner at Philadelphia law firm Blank Rome LLP, who specializes in boardroom battles.

If Icahn decided to convert the bonds, the company could decide to pay him out in cash in lieu of shares. At the current share price, it could take around $120 million to cover all of them.

The company had just $130.7 million on hand as of Dec. 31.

Icahn's investment in the company, which is based in Santa Monica, Calif., and Vancouver, British Columbia, marks his strongest foray into Hollywood yet.

After going on a recent buying spree, Icahn now controls 16.8 million Lions Gate shares, or a 14.5 percent stake, and Mark Rachesky, Icahn's former chief investment adviser, controls 22.8 million shares, or 19.7 percent.