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Lions Gate confirms talks with Icahn

10-Nov-2010 • Bond News

Lions Gate Entertainment Corp said on Wednesday it was on track to hit its fiscal 2011 target of $75 million in earnings before items and confirmed it was in ongoing talks with billionaire hostile bidder Carl Icahn, and its shares rose 3.7 percent, reports Reuters.

Lions Gate reported on Tuesday it swung to a second-quarter loss, reflecting debt payment charges and higher costs for the independent studio as it ramps up its film and television slate while trying to fend off hostile suitor Icahn.

On CNBC on Wednesday, Lions Gate vice chairman Michael Burns confirmed the studio has been holding talks with Icahn.

The shares rose 27 cents to $7.50 a share on the New York Stock Exchange.

On Monday, Reuters reported Icahn and Lions Gate were in talks to settle their litigation as they seek a merger of the studio with Metro-Goldwyn-Mayer, according to a source familiar with the situation.

Two sources also told Reuters that Lions Gate plans to meet MGM in the next few days to present a proposal to combine the two studios once MGM emerges from bankruptcy.

Lions Gate, which produces the "Saw" movies and "Mad Men" series, has set the date of its annual meeting for December 14 following a drawn out effort to thwart hostile suitor Icahn, who has a 33.5 percent stake in the company. In the past, Icahn has threatened a proxy battle.

But recently, Icahn, who is also a debt holder in MGM, has been working with Lions Gate in advocating a merger between that studio and MGM, home to the James Bond films.

Icahn holds more than $600 million in MGM debt, making him one of the company's largest debt holders. He agreed to support MGM's prepackaged Chapter 11 bankruptcy last week after the studio made several changes to its reorganization plan, such as giving Icahn a board seat and an informal agreement to discuss a possible merger with Lions Gate, sources familiar with the matter said.

Lions Gate reported on Tuesday that revenue for the second quarter rose 25 percent to a better-than-expected $456.3 million, driven by successful films including "The Expendables" and "The Last Exorcism."

Lions Gate reported a loss of $29.7 million, or 22 cents per share, for its fiscal second quarter, compared with a net profit of $31.7 million, or 27 cents per share, a year earlier.

Analysts on average had forecast revenue of $418.85 million for the quarter, according to Thomson Reuters I/B/E/S.

While analysts cite good momentum in Lions Gate's TV and film business, investors remain focused on the complex situation involving Icahn.

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