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Carl Icahn Drops Lions Gate Shares

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CHARLES ICAHN LIONS GATE
AP Photo/Charles Rex Arbogast

LOS ANGELES — Activist investor Carl Icahn said Tuesday that he is shedding his entire stake in Lions Gate Entertainment Corp., ending a more than two-year battle for control and sending shares of the niche movie studio tumbling in after-hours trading.

The sale, announced after the market closed, included an agreement for both sides to drop all pending lawsuits against each other.

Lions Gate and its next largest investor, Mark Rachesky, each agreed to buy back a quarter of Icahn's shares for $7 each, which is about what Icahn spent acquiring his one-third stake in the company.

Lions Gate said that it has the right to designate one or more parties to purchase Icahn's remaining stake, also at $7 a share, over the next 35 days.

The studio's shares fell 5 percent, or 37 cents, to $7.15 in aftermarket trading.

Icahn wished the company well in a statement.

"As some have noted, my own `slate' is pretty full at the time, and I therefore determined that it is a good time to exit," he said.

Icahn is also the largest shareholder in Clorox and is seeking election to the board of that company. He said Tuesday that he would vote to sell Clorox if appointed – or he would buy it himself.

Lions Gate CEO Jon Feltheimer said Icahn's departure was in the best interests of Lions Gate shareholders and noted that because the company is buying back some of Icahn's shares, the number of shares outstanding will be reduced and share value should increase.

The company's portion of the buyback amounts to a little more than 11 million shares, or 8 percent of the total.

"We believe that this accretive and antidilutive transaction is in the best interests of all Lions Gate shareholders, and it allows the company to continue to focus on the execution of its long-term business plan," Feltheimer said in a statement.

Analyst Marla Backer with Hudson Square Research, who has a "buy" rating on the shares and a $9 price target, said that the agreement to part ways was a good thing.

"What Lions Gate went through with Icahn months ago was very debilitating and cost shareholders significantly," she said. Legal bills were in the millions of dollars and distracted the company from regular operations, she said.

But she added that the tumultuous period during which Icahn second-guessed every Lions Gate decision – including opposing and then supporting an ultimately failed bid to buy legendary studio Metro-Goldwyn-Mayer Inc. – may have helped the company figure out its priorities.

"It forced management to take a real look at reassessing what its core businesses are," she said.

In June, Lions Gate agreed to sell its Canadian distribution arm, Maple Pictures, for $38.5 million. After its quarterly earnings release earlier this month, CEO Feltheimer reiterated the company's aim to simplify its business and sell off non-core assets.

Lions Gate, which is based in Vancouver, Canada, but operates out of Santa Monica, Calif., produces such hit television shows as "Mad Men," "Weeds" and "Nurse Jackie." Its latest movie release, "Conan the Barbarian," bombed at the box office, but analysts have high hopes for the 2012 release of "The Hunger Games," the first in a movie series based on the young adult books by author Suzanne Collins.

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