The Icahn Saga: The Poison Pill That Isn't

Carl Icahn is a reporter's dream. When things get a little slow, the 74-year old dealmaker always does something to spice it up. Which is what he did today when he said he was launching a tender offer for shares of Lionsgate(LGF)in a bid to give him a 30% stake in the company that makes the Saw and Tyler Perry movies.

So why is Icahn making his move on Lionsgate now, nearly a year after he last tried to win control of the company through a failed tender offer to buy the studio's convertible bonds? Among the reasons is this tasty little morsel: in 2009, when the company mounted a successful defense against Icahn, it went out of its way to remind investors that if Icahn got enough of the convertible notes he could be considered to control more than 20% of the company. That would trigger a bank covenant and "could result in a cross-default and acceleration of Lionsgate's payment obligations," the company said back then in a press release. Translation: the company might have to cough up a chunk of cash to pay off its $340 million revolving line of credit to its banks.

Well, that defense doesn't seem to be very potent right now. While no one was looking - no one except Icahn, it appears - Lionsgate but paid down that line of credit. As of Dec. 31, it said in its most recent financial filings, it had drawn only $12 million. So, if Icahn triggered the 20% threshold, it would only cost Lionsgate $12 million to pay off the line, not much for a company that had revenues of nearly $1.2 billion in the nine months that ended Dec. 31.

Neither Icahn not Lionsgate would comment. But Icahn is apparently worried that Lionsgate was keeping its powder dry so that it could use that credit line to make an acquisition, and both MGM and Disney's (DIS)Miramax library are on the market right now. He worried that they might overpay, I am told by sources who understand Carl Icahn's thinking on this issue. And without that line of credit, Lionsgate might not have the money to mount a bid at all, or at least that's what Icahn may be thinking.

Then again, the credit line is cheap money, priced at 2.5% above "adjusted LIBOR" or 2.73% as of Dec. 31, the company's filing says.. That's super cheap money that Lionsgate would no longer have at its disposal. And don't you think for a minute that Lionsgate's management won't make that point to shareholders in an effort to dissuade them from tendering their shares of Icahn.

Yup, here comes Lionsgate-Icahn, the sequel.

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