Icahn, Lionsgate reach temporary truce

Studio to explore possible acquisition opportunities

Lionsgate and Carl Icahn are taking a 10-day truce in their bitter battle for control of the minimajor so that Lionsgate and its largest investor can pursue mergers and acquisitions.

Lionsgate, which didn’t specify which companies it may be seeking, disclosed the pact Friday afternoon in an 8K filing with the Securities and Exchange Commission.

“Pursuant to the Agreement, among other things, Lionsgate and Mr. Icahn have agreed to work together on certain acquisition opportunities beginning on July 9, 2010 and ending on July 19, 2010, and Lionsgate agreed to refrain from specified actions during that period,” the filing said.

The filing contained a letter sent Friday to Icahn, who owns more than 37% of the stock, from Lionsgate Vice Chairman Michael Burns. It said at that the end of the 10-day agreement, Lionsgate would disclose all of the information it shares with Icahn so that the investor doesn’t have non-public information; that Lionsgate won’t issue any common stock during the period; and that Liosngate won’t set a date for its shareholders meeting for the next 45 days.

Lionsgate’s held recent discussions with MGM, which is struggling under a massive $3.7 billion debt load and has asked for a sixth extension on its debt payments. Other possible merger and acquisition candidates for Lionsgate could be Overture Films and Summit Entertainment.

Shares of Lionsgate were up 8 cents to $6.84 in trading Friday on the New York Stock Exchange.

Icahn completed a $7 a share hostile tender offer on July 1 and has promised to launch a proxy fight to replace Lionsgate’s 12-member board and oust toppers Jon Feltheimer and Michael Burns. Lionsgate responded a day later by announcing a poison pill that will be enacted if Icahn’s stake hits 38% and said the plan is designed to avoid a “creeping” takeover, ensure that its board has time to allow competing offers to emerge and to make certain that all shareholders are treated fairly.

Icahn’s stake had been at 19% several months ago when he launched the offer and repeatedly criticized Lionsgate’s board and management for what he sees as overspending — particularly on features — and a misguided strategy of trying to acquire another film library. Icahn said two weeks ago, however, that he wouldn’t dismiss out of hand supporting a merger between Lionsgate and MGM.

During recent weeks, MGM is believed to have met informally with top execs from Lionsgate, Spyglass Entertainment and Summit Entertainment as possible partners that could run the studio and bring in production funds.

Lionsgate was one of three bidders making a formal offer for MGM earlier this year but withdrew from the bidding in March when MGM asked it to sweeten the bid — believed to be in the $1.3 billion to $1.4 billion range, far short of MGM’s target.

Lionsgate also revealed in a Securities and Exchange Commission filing earlier this year that it had held talks with Icahn about teaming on an offer for MGM last year but those talks hadn’t been fruitful.

During the tender offer, Lionsgate labeled Icahn’s offer “financially inadequate” and “coercive.” The minimajor also blasted Icahn’s investment record, portraying him as an incompetent meddler, and asserted that its fiscal 2010 results show that its management strategy is sound.

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