Carl Icahn, Lionsgate can't make a deal

Financier seeking to replace three board members

Friendly efforts to allow Carl Icahn to appoint board members to Lionsgate have collapsed because the billionaire financier refused to adhere to a standstill agreement that would have limited the number of shares he could amass.

The failure to strike an amicable deal, after three weeks of haggling, might set the stage for a proxy battle or hostile takeover of the studio known for the "Saw" franchise and lucrative Tyler Perry movies.

Insiders say Icahn was negotiating to replace three Lionsgate directors, one of them with his son Brett Icahn.

Lionsgate, though, wanted assurance that Icahn would not increase his stake to 20% or more, an event that would have altered certain bank covenants relating to a $340 million credit facility.

Icahn has been an investor in Lionsgate for four years and recently upped his stake to 14.5% of the company while lowering his cost basis to $6.80 a share. Lionsgate shares fell 6% on Wednesday to $4.96.

Like the rest of the market, Lionsgate stock has taken a beating recently, though they have done better than most since Jon Feltheimer was named nine years ago. In that time, Lionsgate has gone from $100 million in annual revenue to $1.6 billion, and the stock has risen from $1 a share.