Icahn a drag for Lionsgate

Studio still feeling effects of takeover efforts

Even though Carl Icahn’s takeover efforts at Lionsgate Entertainment have cooled down, the company is still experiencing the effects of the billionaire investor’s months-long campaign. The mini-major reported Thursday a net loss in the quarter ended Dec. 31, in part due to the nearly $8 million in defense costs it incurred fighting Icahn.

The $6 million net loss was also blamed on $13 million in losses on Lionsgate’s stake in the newbie premium channel Epix. Thanks to its deal with Netflix, Epix is now profitable but it reports a one-quarter lag. Without the Icahn and Epix costs, Lionsgate would have reported a $15 million profit on revenue gains of 24% to $423 million. Executives said they continue to push to get carriage for Epix as a linear channel, including with the top three distributors, Comcast, Time Warner Cable and DirecTV. They said a deal was just inked with cable operator Suddenlink.

Lionsgate reported earnings after the markets closed on Wednesday. CEO Jon Feltheimer told analysts on Thursday morning he was pleased by the company’s results but given the “headwinds” that the industry faces Lionsgate would continually evaluate its assets, including looking at selling non-core businesses.

Driving financials gains in Lionsgate’s fiscal third quarter were strong DVD sales, mainly for “The Expendables”; strong performances from TV and film overseas; and lower marketing costs for film in the quarter.

Box office revenue grew 9% in the period to $54 million, helped by the releases of “The Next Three Days,” “For Colored Girls” and “Saw 3D.” Home entertainment revenue jumped 63% to $174 million. In addition to “The Expendables,” the release of Tyler Perry’s “Madea’s Big Happy Family” boosted DVD sales.

International film revenue grew 31% in the quarter to $21 million.

TV production revenue was up 5% to $96 million on licensing of “Tyler Perry’s House of Payne” and spinoff “Meet the Browns.”

Feltheimer said the company has undertaken some steps to mitigate risk in the future, including plans to produce 10 films with budgets under $2 million, in the horror and comedy genres. He also said Lionsgate would continue to use third-party financing for productions and marketing.

Lionsgate execs did not address Icahn directly on the earnings call on Thursday. In December, Icahn dropped his proxy fight for control of Lionsgate a day before his tender offer of $7.50 a share was due to expire. A week earlier, a New York court tossed out Icahn’s lawsuit against Lionsgate seeking to reverse a debt-for-equity swap that diluted his stake in the company. Icahn still owns a 33% stake in Lionsgate.

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