Lionsgate raises earnings forecast

TV, record library, home entertainment boost studio

Lionsgate, pressured by Carl Icahn’s hostile takeover bid, has announced that preliminary results for its fiscal year ended March 31 are 50% better than it forecast two months ago.

The minimajor said Thursday that the improvement was due to its TV business, record library revenues and higher home entertainment revenues.

Shares of Lionsgate edged up 4 cents to $6.91 in mid-session trading on the New York Stock Exchange. Icahn, who owns 19% of Lionsgate, has offered $7 a share in a bid that expires Friday — and has said he’ll remove Lionsgate management because it has “failed” shareholders.

Lionsgate, which report its fiscal 2010 results on June 1, said adjusted earnings before interest, taxes, depreciation and amortization are more than $115 million. “These results underscore the strengthening financial performance that the company has been reporting throughout the fiscal year,” it added.

Lionsgate co-chair and CEO Jon Feltheimer said continued growth of video on demand and other on demand services has also been a recent catalyst for the improved performance. He also said the company’s targeting a return to positive free cash flow in fiscal 2011.

“We remain on track to achieve the significant free cash flow generation for fiscal 2013 to 2015 of $100 million to $125 million annually (before contributions from TV Guide Network, EPIX and FEARnet) as outlined in our most recent investor presentation,” he added.

The latest salvo in the taekover battle came two days after Icahn scored a victory with decision by Canadian regulators to rescind Lionsgate’s poison pill defense. Lionsgate has announced it’s appealing that decision along with an eight-day delay to May 12 for its scheduled shareholder vote on the poison pill.

Poison-pill provision, dubbed a shareholder rights plan, had been designed to dilute the value of Icahn’s shares if he exceeds a 20% stake.

Analysts believe Icahn will have to sweeten his bid if he wants to obtain control. The company’s characterized Icahn as a short-term opportunist who’s unwilling to let management’s long-term strategy work.

Shares have gained 24% this year but remain well below their highs in 2007.

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