Activist investor Carl Icahn said he has no plans to push for a sale of Lions Gate Entertainment Inc, but criticized the Hollywood studio's expenses for being to high and called its purchase of TV Guide reckless.
The billionaire investor, who controls 14.5 percent of Lions Gate's stock, is seeking to gain more influence over the film and television studio. He announced on Thursday a tender offer to buy $325 million worth of its convertible debt.
The move came a day after negotiations to get board representation on Lions Gate fell apart.
In an interview with Reuters, Icahn said he felt Lions Gate's expenses were extremely high and criticized its recent acquisition of the TV Guide cable channel.
It borders on recklessness to spend $250 million for a company based on short-term borrowing from a revolver, particularly when that revolver goes into default if anyone buys over 20 percent of the common stock, Icahn said.
If an investor's stake in Lions Gate exceeds 20 percent, it could trigger a change in control which in turn could create problems with Lions Gate's credit facility under existing financing agreements as set forth in a Securities and Exchange Commission filing by the company last year.
Buying the debt will provide Icahn with the ability to ultimately vote more shares if he chooses to convert them into shares, ultimately putting him in a stronger position to affect the outcome of a proxy vote, said Richard Dorfman, managing director of investment firm Richard Alan Inc, which owns shares in Lions Gate.
Icahn said in a statement the tender offer is for all of Lions Gate's $150 million convertible senior subordinated notes due 2024 and for $175 million in notes due 2025.
Lions Gate, Hollywood's largest independent studio and producer of the popular Mad Men cable TV show and Saw film franchise, was not immediately available for comment.
Icahn had said on Wednesday that talks with Lions Gate had clashed over certain aspects of a standstill agreement the company had demanded as a condition to giving him board seats. Lions Gate was trying to get Icahn to agree to limit his stake, while not demanding that of other large shareholders.
Lions Gate said on Wednesday it ultimately concluded it could not meet Icahn's requests and continue to serve the best interests of all of its shareholders.
The studio's library of more than 8,000 films and 4,000 TV shows is considered its most valuable asset, generating $275 million in annual revenue and $100.
Lions Gate shares fell 27 cents, or 5.44 percent, to close at $4.69 on the New York Stock Exchange before Icahn's news, and held steady in extended trading.
(Reporting by Sue Zeidler; editing by Richard Chang)