Dow Jones Newswires

After Lions Gate Rebuff, Icahn Shows He's Still Interested

By Brian Kalish
Dow Jones Newswires (June 22, 2009)

Although Carl Icahn fell short in his effort to influence the board of directors at Lions Gate Entertainment Corp. (LGF), his continued share purchases suggest that he isn't done with the independent filmmaker.

Since the beginning of June, Icahn has purchased $15.2 million worth of Lions Gate stock, according to regulatory filings. Icahn believes that by acquiring more stock he will be able to wield greater influence with the company, said David Bank, an equity research analyst at RBC Capital Markets.

Icahn, however, still needs to make his case to other shareholders, Bank said. "It would seem like he has not done so well at this point."

Icahn sought board seats, then made a tender offer in an effort to increase his holdings by purchasing $325 million of Lions Gate convertible debt. But the company turned down his request for board representation, and convertible holders largely rejected his tender offer.

Icahn, who didn't return calls for comment, has publicly denied that he intends to seek a sale of the company - a denial that has been greeted skeptically by many observers.

"Everything he does is to position the company for a sale," said Richard A. Dorfman, chief executive of Richard Alan Inc., a New York-based investment firm focused on the media and entertainment industries.

There is "no question in my mind that this company will be purchased at some point," said Dorfman, whose firm holds Lions Gate shares. Moreover, Dorfman said, because Lions Gate shares are undervalued, Icahn deserves to succeed. "He's on the right side here."

A Lions Gate spokesman declined to discuss Icahn and potential transactions involving the company.

After Icahn's most recent stock purchases, he reported a 16.9% stake in the company. If Icahn were to acquire more than 20% of company stock, that could trigger a change-in-control clause in Lions Gate's credit facility, which could result in a default and the acceleration of outstanding debt, the company said in a March press release.

Dorfman said Icahn might engage in a game of brinkmanship, threatening to bring his stake above 20%. "That could throw the company's management into a tizzy, and they may have no choice at that point but to sell the company," he said.

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