Lionsgate, Carl Icahn call 10-day truce

Mini-major will not issue stock during 'temporary detente'

TORONTO -- Corporate raider Carl Icahn and Lionsgate have agreed to a 10-day truce to jointly work on M&A deals, documents filed with the Securities and Exchange Commission reveal.

Lionsgate, in a letter dated Friday from vice chairman Michael Burns to Icahn and Icahn Capital Lp., noted that the mini-major and its largest shareholder are to "work together on certain acquisition opportunities" as they agreed to lay down their guns until midnight, July 19.

The cease-fire, characterized by sources as a "temporary detente" to find common ground, could open the way for Icahn and Lionsgate to agree on moves that could include a deal with MGM.

As part of the pact, Lionsgate will not issue stock or do a corporate deal "outside the ordinary course of business" in the period.

Lionsgate also agreed not to "engage in active negotiations for any transaction" other than an acquisition that they both agree on and promised not to set a date for an annual shareholder meeting for 45 days after July 19. That pledge comes amid a threat of a proxy fight to be waged by Icahn and his affiliates at Lionsgate's annual shareholders meeting.

In addition, Lionsgate on July 20 will publicly disclose all material information supplied to Icahn during the temporary truce so the shareholder can, if he wishes, freely resume his battle with the company.

The truce agreement was brokered by Lionsgate's Michael Burns, Icahn and his son, Brett Icahn.

The Lionsgate correspondence makes no mention of possible board seats for Icahn's representatives or other measures that could signal which side stands to win the most in a truce.

However, it appears Lionsgate is willing to consider boardroom representation for Icahn, including a likely seat for his son, consistent with his major stake in the company.

The Icahn stake in Lionsgate stands at nearly 38% after his tender offer recently expired.

That said, Lionsgate considers Icahn a minority shareholder unable to exercise control of the mini-major, unless, of course, he pays a "control premium" well above his expired $7 per-share offer price for all outstanding shares.

Should Icahn or Lionsgate violate the terms of their cease-fire, the offending party may seek financial compensation or legal remedies, including a court injunction, "to prevent any breaches and to enforce specifically this agreement's terms and provisions."

Sources described the truce as movement in the right direction but not a definitive agreement.

If Lionsgate and its largest shareholder successfully hold their fire through July 19, the agreement could be extended and ultimately produce a final settlement of their differences.

Alternatively, Lionsgate and Icahn could return to their Punch & Judy act, and the activist shareholder could launch another tender offer or carry through on a threat of a proxy fight.

Shares in Lionsgate rose 8 cents Friday to $6.84 on the New York Stock Exchange.
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