Icahn offers to buy Lionsgate debt

Financier would pay about $325 mil if studio accepts deal

Carl Icahn’s bid to hold sway over Lionsgate continued Thursday when the billionaire financier tendered an offer to buy about $325 million of the company’s debt.

The offer came a day after both parties said that friendly discussions about allowing Icahn to swap some Lionsgate directors for some of his choosing broke down. At issue were terms of a standstill agreement, Icahn told The Hollywood Reporter on Thursday.

“The deal broke down because, after giving them a standstill that stated I could not do a tender offer or proxy fight, among other things, I requested that those standstill conditions apply to any new board member that also had a lot of stock,” Icahn said. “It was shortsighted on their part not to give us that.”

Icahn said he wasn’t refering to any stockholder in particular. The biggest shareholder is money manager Mark Rachesky, a one-time employee of Icahn’s who is not a Lionsgate board member and owns just under 20% of its shares.

Some observers say Icahn’s interest is in injecting more fiscal discipline into Lionsgate, which reported last month that it lost $93.4 million in its fiscal third quarter. The company also recently spent more than $250 million to acquire TV Guide Network and TVGuide.com.

“It borders on recklessness to make a purchase for $250 million cash funded by a fragile revolver that comes due if anyone purchases 20% of the common stock,” Icahn told THR.

Icahn has been collecting Lionsgate shares for four years, though without much fanfare. Icahn’s stepped-up interest in Lionsgate includes his desire to land a board seat for son Brett Icahn, who has been point-man between Icahn & Co. and Lionsgate.

Icahn is interested in purchasing $150 million in debt due in 2024 and $175 million due in 2025 that yields 17%. The due date for the smaller amount is dependent on the stock climbing to $11.50 by fall 2011, and the second depends on the stock trading north of about $14.25 by March 2012.

The uncertainty surrounding Icahn’s intentions has caused Lionsgate to largely sit out a rare stock-market rally this week, with shares falling 6% on Wednesday and another 5% on Thursday to $4.69.