Lions Gate Entertainment Corp has hired an advisory team including investment bank Morgan Stanley and the law firm Wachtell, Lipton, Rosen and Katz to launch a defense against financier Carl Icahn, according to two people with knowledge of the situation.
Icahn, who controls 14.5 percent of Lions Gate's shares, is seeking to boost his influence over the Hollywood studio by offering to buy $325 million worth of its convertible notes.
If he succeeds in buying the debt and converts it all into equity, Icahn's stake in Lions Gate would double to about 28 percent to 29 percent, according to sources with knowledge of the debt terms who were not authorized to speak publicly.
However, the sources were skeptical about whether Icahn would make that costly move since the conversion price is far above Lions Gate's current share price.
Lions Gate jumped 8.37 percent to close at $5.31 on the New York Stock Exchange.
Talks between Icahn and Lions Gate -- producer of the popular Mad Men cable TV show and Saw film franchise -- broke down last week after the two sides clashed over certain aspects of a standstill agreement that the studio had demanded of the activist investor before giving him board seats.
Icahn told Reuters last week that he felt the expenses of Lions Gate were extremely high and criticized the company's recent TV Guide cable channel acquisition. He said he had no plans to advocate a sale of the company in this environment.
Icahn and affiliates on Tuesday offered to buy $150 million of Lions Gate's convertible notes due 2024, at a 25 percent discount, or $750 for each $1,000 principal amount tendered. They also offered to buy $175 million convertible notes due 2025 at a 27 percent discount, or $730 for $1,000 tendered.
Lions Gate and Icahn were not immediately available for comment.
(Additional reporting by Anupreeta Das, editing by Tiffany Wu, Richard Chang)