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Lions Gate and Icahn officially begin settlement talks; $16 million set aside for golden parachutes

Lions Gate Entertainment and activist investor Carl Icahn have officially begun settlement talks to end their long-running and acrimonious fight over the future of the company.

In a filing with the Securities and Exchange Commission on Monday, the Santa Monica-based movie and TV studio acknowledged for the first time that it is in discussions with Icahn about a settlement and may soon engage in formal negotiations. Icahn has approached Lions Gate about striking a deal, according to the filing, and people familiar with the matter said the investor has a specific proposal on the table.

"The board believes that it would now be appropriate to respond to the Icahn Group's recent communications to determine whether there may be a basis on which to engage in negotiations and will do so today," Lions Gate stated in the filing.

The disclosure comes just days before Icahn's $7-a-share hostile offer to take control of the company is set to expire Friday. Icahn has extended the expiration date twice after receiving a tepid response from shareholders.

Lions Gate's efforts to enact a so-called poison pill that would block Icahn's takeover attempt was recently voided by authorities in Canada, where the company is legally domiciled. Subsequently, 56% of the company's shareholders voted to approve the poison pill.

The two sides have engaged in preliminary talks in recent weeks about a potential deal that could see Icahn gain seats on Lions Gate's board of directors in exchange for the investor ending his bid to gain control of the company, as Company Town reported last Friday.

While Lions Gate and Icahn have had on-and-off discussions about their tense relationship since October 2008, when Icahn began increasing his stake in the company to the current 19%, those talks never led to a resolution. Now it appears both sides may believe it's in their best interest to broker a peace.

For the interim, Lions Gate's board is continuing to recommend that its shareholders not accept Icahn's offer, which it labels "financially inadequate."

As a defensive tactic, Lions Gate's board has agreed to put $16 million into a trust that would pay  severance to the company's top managers in the event that they are ousted after a takeover by Icahn, the filing said. Chief Executive Jon Feltheimer, Vice Chairman Michael Burns and three other top executives would be owed millions of dollars if their employment is terminated without "cause" in connection with a change of control.

Icahn has been highly critical of the top managers and has publicly said he would replace them if he prevails in his takeover attempt.

Lions Gate stock fell 16 cents, or 2.4%, to $6.54 on Monday.

-- Claudia Eller and Ben Fritz

 
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