Lionsgate analyst call ignores Icahn offer

Studio to focus on growth so investors don't side with Icahn

TORONTO -- If Lionsgate CEO Jon Feltheimer is bracing for a potential proxy fight with activist shareholder Carl Icahn, he didn't show it Wednesday morning during a post-result analyst call.

Projecting his customary coolness and control, Feltheimer ignored Icahn's proxy battle threat in prepared remarks, and instead thanked company shareholders for yet again rejecting the dissident shareholder's $7 per-share takeover offer.

"They (shareholders) clearly understand the real story. All of our businesses are performing well, our momentum is strong and our trajectory is positive," he said.

Then Feltheimer told analysts to restrict their questions to the company's latest results, even as he subtly pitched investors on how to continue voting their shares by outlining four key drivers to future Lionsgate growth: an expanding 12,000 title library, TV production, a growing channel distribution business and a theatrical film slate.

"Libraries that are replenished with fresh product work better than those that aren't," he argued, in a knock at Icahn for seeing Lionsgate's library as a liability rather than the company's salvation.

On the TV side, Feltheimer pointed to revenue for the year to March 31 growing 60% to $351 million, and the Epix premium channel being potentially cash flow positive should Lionsgate and partners Viacom and MGM complete carriage deals with two of the three major distribution partners it is currently negotiating with.

His comments followed Lionsgate on Tuesday shrinking its loss for fiscal 2010 to March 31 as overall revenues rose 8%, as TV business growth offset a fall in revenue from the motion picture division.

On the theatrical front, Lionsgate said it will continue to release 13 to 14 movies a year, divided between produced, acquired and co-financed product.

The mini-studio predicted those annual slates will each be capable of delivering between $125 million and $150 million in ultimate profitability.

This coming weekend, Mandate Pictures topper Joe Drake predicted the romantic comedy "Killers," with its $70 million budget, will prove profitable if it opens in the low- to mid-20s at the boxoffice, and will sustain $10 million to $15 million in losses if it opens in the mid- to low-teens.

The analyst call also took place against the backdrop of Lionsgate investors yet again rebuffing Icahn's tender offer, even as he extended it to June 16.

Icahn went one step further Tuesday, however, promising a proxy fight if his ambitions for boardroom representation continue to be thwarted by a stubborn Lionsgate management.

But Feltheimer, in his focus on Lionsgate's growth strategy, signalled the top priority for senior management is to keep churning out profits so investors don't side with Icahn and any board slate he proposes should a proxy fight come to pass.

While declining to give firm guidance, Feltheimer predicted double digit growth in revenue for fiscal 2011, a repeat of strong EBITIDA as in fiscal 2010, and a return to positive free cash flow.

Lionsgate's next annual shareholders meeting is expected in September in Toronto, around the time of the Toronto International Film Festival.
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