Icahn extends Lionsgate buy offer

Response tepid to $7 share price

Carl Icahn is extending his hostile takeover offer of Lionsgate for another 10 days after receiving a mild response from shareholders with about 5.5% of the shares tendered.

A spokesman for Lionsgate said the lack of interest underscores the company’s arguments against Icahn’s bid. “His offer is inadequate and our shareholders recognize that,” said Lionsgate spokesman Peter Wilkes.

Icahn, who already owned about 19% of the minimajor, made the disclosure in a brief announcement after the market closed Friday. He said his $7 a share offer, which was due to expire Friday, had been extended until May 10.

Icahn also disclosed that 6.55 million shares have been tendered under terms of his offer. Many analysts have said that if Icahn expects to gain control of Lionsgate, he will have to sweeten his bid.

Lionsgate stock had edged down 8¢ to $6.92 a share Friday on the New York Stock Exchange.

Friday’s announcement came a day after Lionsgate issued a bullish earnings outlook that is 50% better than it forecast two months ago due to improvement in its TV business, record library revenues and higher home entertainment revenues.

Icahn, who has pledged that he’ll oust current management if he gains control, has already asserted that the Lionsgate figures were meaningless due to a lack of specifics on amortization and spending on films.

Lionsgate said Thursday that adjusted earnings for its fiscal year ended March 31 before interest, taxes, depreciation and amortization are more than $115 million.

Co-chair and CEO Jon Feltheimer said continued growth of video on demand and other services has also been a recent catalyst for the improved performance and added that 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 (from TV Guide Network, Epix and FearNet) as outlined in our most recent investor presentation,” he added.

Icahn scored a victory on Tuesday with the decision by Canadian regulators to rescind Lionsgate’s poison-pill defense. Lionsgate’s appealing that decision and has moved the shareholder vote on the poison pill back a week to May 12. The 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.

The company’s characterized Icahn as a short-term opportunist who is unwilling to let management’s long-term strategy work. Icahn’s been highly critical of Lionsgate’s spending and was unimpressed by the earnings forecast.

“I don’t know how any of these guys can tell you what they’re going to earn in 2013,” he told CNBC. “These earnings don’t mean anything. You have no idea whatsoever about what the amortization is and what the money is they’ve spent on films. They don’t tell you that, and that worries me a little bit, because why aren’t they telling you what the amortization is?”

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