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The B.C. Securities Commission (BCSC) has upheld its decision to prevent Lions Gate Entertainment (NYSE:LGF) from using its shareholder rights plan to prevent a takeover bid by activist investor Carl Icahn.
In its report released Tuesday, the majority of the BCSC panel examining the case said that if it had not cease-traded the shareholder rights plan (SRP), also known as a poison pill, it would have deprived Lions Gate shareholders the opportunity to properly respond to the Icahn bid. The panel said poison pills are in the public interest when they are used as a temporary defense against a takeover bid and to buy time for a target company board to respond with a counter bid. The panel noted the Lions Gate board had no intention of selling the company and did not make any attempt to seek an alternative bid. If the panel had allowed the poison pill to go forward, Lions Gate could have kept the shareholder rights plan in place indefinitely, which would have set a precedent counter to the policy set by Canadian securities regulators regarding the use of shareholder rights plans. The report said: “That would be a dramatic, and in our view, unwelcome change to the public interest policy principles governing the use of SRPs in take-over bids in Canada." The panel said the Lions Gate board could have implemented a poison pill before Icahn made his bid in March, but did not. The report noted, “Icahn was clearly interested in exercising greater control over Lions Gate’s affairs. … We doubt any of this was lost on the Lions Gate board, yet for its own reasons, it chose not to adopt an SRP and put it before the shareholders before Icahn [Group] made its bid.”
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