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Lions Gate just says no to Carl Icahn -- again

It's little surprise that Lions Gate Entertainment once again just said no to Carl Icahn, rebuffing his hostile tender offer to take control of the movie and television studio. Two weeks ago, Lions Gate rejected the activist shareholder's previous bid at the same $6-a-share price to raise his stake in the company to nearly 30%, from 18.9%.

"We believe nothing has changed -- the offer remains financially inadequate and still does not reflect the full value of Lions Gate shares," Lions Gate Chief Executive Jon Feltheimer said in a statement Tuesday.

In early-morning trading, Lions Gate's shares were up 3 cents to $5.85.

Lions Gate said its board of directors had voted unanimously against Icahn's offer to buy all outstanding shares for $6 each.

Feltheimer said Icahn is bidding for full control of the company "without offering a meaningful vision, without demonstrating a relevant track record of industry experience and without paying a control premium."

Icahn, who could not be reached for immediate comment Tuesday morning, has yet to articulate his vision for Lions Gate, other than to say the studio needs to slash costs and avoid expensive acquisitions of film libraries such as Metro-Goldwyn-Mayer Inc. without shareholder approval.

Lions Gate's rejection of Icahn's latest bid comes one day after the studio submitted a bid for distressed MGM, competing against Time Warner Inc. and industrialist Len Blavatnik's Access Media.

It's highly unlikely that Lions Gate's offer, which people familiar with the matter say is far below Time Warner's $1.5-billion bid, will prevail.

Likewise, the common wisdom in Hollywood and Wall Street is that Icahn's chances of seizing control of Lions Gate at $6 a share are slim to none.

"There is not going to be any of the top 10 shareholders giving away their stock at $6 a share," media analyst David Miller of Caris & Co. said in an interview, noting that if Icahn is really serious he should consider raising his offer. "$9 a share would raise a couple of eyebrows," Miller suggested.

In a report published by Caris & Co. on Monday, Miller questioned what Icahn's endgame is. "While a break-up of Lions Gate and sale of the various pieces is certainly a plausible scenario in the distant future," Miller wrote, "we believe Icahn sees an opportunity to morph Lions Gate into a higher-margin enterprise through a massive overhead slash, especially in the theatrical release division."

Miller's note added, "We have never really had a problem with Lions Gate's overhead per se," but more with what the studio spends to market certain movies.

Icahn has been highly critical of Lions Gate's management team, led by Feltheimer and Vice Chairman Michael Burns, for spending too much on overhead, movies and last year's acquisition of TV Guide Network.

However, in a recent Wall Street Journal story, Icahn suddenly reversed himself and praised management's decision to buy TV Guide Network and TVGuide.com.

-- Claudia Eller

 
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