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Icahn Withdraws Lions Gate Bid

UPDATE: No Icahn director nominees gain seats - Well, it looks like Lions Gate and its shareholders are getting what they wished for. But, who really is the winner?

Well, it looks like Lions Gate and its shareholders are getting what they wished for. But, who really is the winner? Lions Gate announced that, based on preliminary estimates shareholders rejected all five of Carl Icahn’s director nominees.

Great job, management. What is the reward for their loyal shareholders?

The stock Tuesday dropped nearly 7 percent, to $6.63 per share. The stock is now down more than 11 percent in two days and at its lowest price since August 30.

In a statement, the company said: “With Lionsgate poised for continued future success, the Board and management team will continue to focus on building the Company's strong portfolio of brands and franchises and positioning our unique and diversified platform of assets for future growth.”

Now, I don’t believe management is always obligated to sell its shares to anyone who tenders at a higher price.

But, suddenly Icahn’s $7.50 offer is more than 13 percent higher than the current price. And there does not appear to be a catalyst for the shares.

There is still one big hope remaining for Lions Gate shareholders. Remember, Icahn had asked the court to cancel the deal back in July when Lions Gate issued shares to director Mark Rachesky, whose 16.2 million new shares diluted Icahn’s stake to its current 33 percent or so.

Icahn on Monday noted that the judge agreed to hold a full trial on the matter within the next several months and will require Lions Gate to hold a shareholders meeting again in September 2011 following his ruling in the case.

By then Lions Gate shareholders will probably be rooting hard for Icahn to resurface and restore the value of their shares.

One thing is for sure: Icahn will probably identify its next target in the next few days.

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December 14, 2010 - Is Carl Icahn finally throwing in the towel on Lions Gate? The activist hedge fund manager said in a regulatory filing Monday that his offer to purchase all of the outstanding common shares of Lions Gate Entertainment Corp. for $7.50 per share in cash has expired.

And unlike on five previous occasions, he did not extend the date of the offer. Rather, Icahn said he is withdrawing the offer because a key condition had not been met.

He had called on the New York State Supreme Court to grant, by 11:59 p.m., Vancouver time, on Friday, his motion for a preliminary injunction preventing the Lions Gate shares issued on July 20 to a fund controlled by director Mark Rachesky from being voted at the annual shareholder meeting on Tuesday, December 14.

As a result, he said he will not purchase any of the Lions Gate stock tendered in the offer. He also said all Lions Gate shares previously tendered and not withdrawn will be returned promptly.

Back in July, the company issued Rachesky 16.2 million new shares, thus diluting Icahn’s stake to its current 33 percent or so. Icahn had been asking the court to cancel that deal, or convert Rachesky’s stock into nonvoting shares.

“We are disappointed that our motion for a preliminary injunction barring the voting of the shares issued to director Mark Rachesky was not granted,” Icahn said in Monday’s filing. However, he noted that the judge agreed to hold a full trial on the matter within the next several months and will require Lions Gate to hold a shareholders meeting again in September 2011 following his ruling in the case.

Investors clearly did not see this coming. The stock is down more than 4 percent Monday to about $7.13. However, this move and the stock’s reaction could work in Icahn’s favor.

Remember, Icahn’s contentious fight with Lions Gate is hardly over. On Tuesday, the company is holding its annual meeting. Shareholders will able to vote for the five director nominees Icahn separately put up for election. He has at least one critical ally.

The very influential Institutional Shareholder Services (ISS) is backing his slate of directors.

With the stock down close to $7, Icahn can now argue that without the specter of a takeover by the octogenarian corporate raider, shareholders have less confidence in the future of the company, and current management.

And even if he loses the battle on Tuesday, shareholders could be assembling again within nine months if the Judge rules in Icahn’s favor over the Rachesky matter.

This battle is far from over.

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