Lionsgate poison pill defense annulled

B.C. securities regulator says 'no justification' for its use

TORONTO -- The lack of a rival bid for Lionsgate led the British Columbia Securities Commission to annul the mini-studio's poison pill defense against activist shareholder Carl Icahn's $7-per-share takeover offer.

As it released its reasons for stopping Lionsgate's shareholders rights plan on April 27, the B.C. securities regulator said it remains reluctant to "interfere with a board's attempt to use an SRP to protect a company's interests."

The release of summary reasons for its decision came on the same day the British Columbia Court of Appeals is to consider an application by Lionsgate to overturn the April 27 cease-trading order by the provincial securities commission.

In its ruling, the B.C. Securities Commission pointed to past cases where regulators did intervene when target company boards actively sought competing bids or alternative transactions. Lionsgate, by contrast, chose not to put the company in play, and so introduced a poison pill defense.

"Lionsgate did not seek, and doesn't plan to seek, competing bids for shareholders to consider," the B.C. Securities Commission panel said after it sided with the Icahn Group against the Vancouver-based mini-major. Absent a rival or better bid for Lionsgate, the regulator noted that take-over bids should leave shareholders of a target company free to make their own decisions whether to accept or reject the bid.

"The Lionsgate SRP would, in our opinion, result in the Lionsgate shareholders being deprived of the ability to respond to the Icahn bid," the regulator concluded.

The commission added the poison pill defense "had exhausted its usefulness and there was no justification for its continuation."

Lionsgate shareholders are scheduled to vote on May 12 in Toronto on the shareholders rights plan, pending the results of the May 7 appeal.

Icahn currently has an 18.9% stake in Lionsgate, and has been thwarted by the studio's current management from installing his own representatives in the boardroom.
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