VANCOUVER (CP) _ Image Entertainment Inc. (NASDAQ:DISK) is claiming that dissident board nominees proposed by Lions Gate Entertainment Corp. (NYSE:LGF) are in a conflict of interest and may sell the company for less than it is worth. In a letter filed with U.S. securities regulators on Monday, Image chairman and chief executive Martin Greenwald urged shareholders to reject the six Lionsgate nominees. He said the Image board is "committed to maximizing value for all of our stockholders," and will not "capitulate" to Lionsgate.
"Lionsgate, on the other hand, wants to force a liquidation of your company at a fire-sale price. We believe a forced sale at this time would not maximize the value of your shares."
Lionsgate, which owns 19 per cent of Image, launched a proxy fight last month to replace the board after what it called an "abysmal" financial performance. That followed an attempt by Lionsgate to buy all of Image for US$4 per share.
"Whatever Lionsgate may claim, it appears the real purpose of its competing slate of paid nominees may be to ensure that its inadequate $4 offer is accepted," Greenwald wrote.
"Indeed, by stating that its US$4 offer has expired by its own terms, Lionsgate may be attempting to acquire Image for even less if its nominees win."
Shareholders will vote Oct. 10 at the company’s annual meeting. Lionsgate shares were down 30 cents at US$9.71 by close Monday on the New York Stock Exchange, while Image shares were up seven cents at US$3.55 on the Nasdaq market. Lionsgate has said its nominees have made no commitment with respect to an offer to acquire Image, and they "have the integrity, leadership and experience necessary to make a substantial positive impact on Image’s management."
A prominent shareholder advisory firm recommended last week that Image shareholders reject five of the six dissident nominees, saying they lacked enough industry experience to warrant support. The only dissident nominee endorsed by Institutional Shareholder Services was Duke Bristow, an economist and corporate governance expert at the University of California in Los Angeles.
ISS said investors may be "understandably anxious that if elected the dissidents may use their newfound board power to ‘stack the deck’ in favour of the sponsor’s bid, regardless of whether such a bid is in the best interests of shareholders."
However, ISS did not let Image management off the hook. It said the company had taken recent steps to disenfranchise shareholders and adversely affect shareholder rights. Image signed a 10-year deal with Relativity Media to distribute Relativity’s movies on all home video and digital formats in exchange for 3.4 million shares, making it one of Image’s largest shareholders.