Studio turns down billionaire's proxy fight

Lionsgate has officially turned down Carl Icahn’s revised bid, asserting that his offer remains financially inadequate.

Lionsgate made the announcement Friday, shortly after the stock markets closed. Shares slid 4 cents to $7.04, still slightly above Icahn’s offer.

Icahn — who owns 18.8% of the minimajor — had announced three days earlier that he’ll launch a proxy fight to replace the existing 12-member Lionsgate board with his own slate of directors. He also dropped the requirement for at least 50.1% of shares to be tendered for his offer deal to go through,

Lionsgate hasn’t commented on the proxy fight but said Friday that its board concluded that the elimination of the minimum tender condition to the offer has “exacerbated the fundamental deficiencies of the offer. The company urged shareholders to reject Icahn’s unsolicited offer — which expires June 16 — and noted that the offer price of $7 a share hasn’t been changed.

“It remains financially inadequate and does not reflect the full value of the Lionsgate shares,” the company said. “The financial inadequacy of the Icahn Group’s offer has become more pronounced since the time that the original offer was launched as Lionsgate continues to successfully execute its business strategy.”

Lionsgate noted that its earnings, announced Tuesday, showed “significant improvements” in profitability and cash flow that underscore the inadequacy of the offer.

“Views of Wall Street analysts have also changed to reflect a higher value for Lionsgate, and the average price target of Wall Street analysts for Lionsgate shares as of June 3, 2010 is at a 26.4% premium to the Icahn Group’s offer price of U.S.$7 per share,” it added.

Lionsgate also reiterated Friday that less than 4% of shareholders have tendered their shares.

Icahn has asserted that he wants to replace the board because existing leadership has failed to hold management accountable for “excessive” spending. He’s zeroed in on the board’s recent move to set up a $16-million fund for potential severance to five top execs, calling it “reprehensible.”

The minimajor hasn’t yet set its annual meeting, at which shareholders will vote on board members. It usually holds the event in Toronto in September.

Lionsgate’s about to release its most expensive film, action comedy “Killers” with Ashton Kutcher and Katherine Heigl. Budget’s in the $70 million range with foreign pre-sales bringing the studio’s investment down to about $40 million.

Icahn’s revised takeover bid could result in his disrupting Lionsgate. If his 18.8% interest grows to more than 20%, that alone could trigger a possible default of Lionsgate’s credit line.

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