Lions Gate to slash another 8% of workforce
Nearly five months after slashing 41 jobs, Lions Gate Entertainment is eliminating another 45 positions, or about 8% of its 550-person workforce. Of that total, 27 people will be laid off, another 10 will become independent contractors in consulting jobs and production deals, and eight will be open positions not filled. The pink slips are being handed out today at the Santa Monica-based movie and television studio, which produces the "Saw" and Tyler Perry films and "Mad Men" and "Weeds" cable series.
The combination of the earlier cuts in November and this second round will shave between $15 million to $20 million off Lions Gate's $135 million-a-year overhead.
Activist shareholder Carl Icahn, who owns 14.5% of Lions Gate stock and is threatening to launch a proxy war against the company, has been pushing management to slash what he views as "excessive" overhead costs at the company.
However, even before Icahn became publicly vocal with that and other gripes he has with management, Lions Gate chief executive Jon Feltheimer (pictured) and vice chairman Michael Burns began taking measures to reduce costs at the studio amid fallout from the tough economy and volatility of its movie and DVD business. Last summer, they enacted a hiring freeze, followed by cuts in the fall.
It was then that Icahn began upping his stake in the studio, buying up the depressed stock on the cheap. Icahn's latest move was to tender an offer for all of the company's public debt. It's unclear at this point just how many takers the corporate raider will have, though Lions Gate's largest debt holder, John Kornitzer, has gone on record to say he refuses to sell Icahn a single bond and wishes he would "just go crawl under a rock."
However, that's a longshot. Even Lions Gate is preparing for the worst, having armed itself with a $2 million defense team of top-notch lawyers, bankers and proxy solicitation and public relations firms.
Despite the inevitable distraction, management is trying to stay focused on its business. After suffering through two bad quarters of weak movie performances, the studio has regained its footing at the box office with the recent hit "Tyler Perry's Madea Goes To Jail" and before that the solid performer "My Bloody Valentine 3-D."
We'll see what happens this weekend when the studio's PG-13 horror thriller "The Haunting in Connecticut" opens in over 2,000 theaters.
Any way you look at it, these are scary times for Lions Gate.
Photo credit: Bloomberg News