Icahn says Lionsgate put equity at risk

Lionsgate urges shareholders to support CEO Jon Feltheimer

TORONTO -- Activist shareholder Carl Icahn on Wednesday accused Lionsgate CEO Jon Feltheimer of putting shareholder equity at risk to restart a stagnant company.

A day after Vancouver-based Lionsgate's board of directors said no to his amended $6-per-share stock offer, Icahn in an open letter to Feltheimer said he had built the company not step-by-step, as claimed, but on one acquisition, the 2004 purchase of Artisan Entertainment.

Icahn said Lionsgate stock spiked to $11.40 after that acquisition, and eventually began a "precipitous decline" once the Artisan pipeline ran out. In trading Wednesday, shares were above $6.

"I believe the stock would have continued declining if I had not acquired 1,236,938 shares between February 5, 2010 and February 11, 2010 and then announced a tender offer on February 16, 2010," he wrote.

Icahn started building his Lionsgate holding in 2006 and purchased a raft of shares when they were in the $10.00 to $11.00 range.

"You claim that I offer no 'meaningful vision,' thereby implying that you have one. I cannot help but wonder why your 'vision' - if so 'meaningful' - never translated into shareholder value?," he questioned after Lionsgate on Tuesday urged shareholders to stay on side with Feltheimer's vision for the company.

Lionsgate on Tuesday said its board of directors concluded that Icahn's amended tender offer was "financially inadequate and coercive," and should be rejected by shareholders.

Icahn on Wednesday also reiterated opposition to Lionsgate pursuing MGM's library catalog, or any other expensive library deals.

"I continue to fear (as I have previously expressed) that the current board will allow you to borrow billions to pursue your new 'vision' of library consolidation, exhibited by your interest in acquiring MGM and Miramax," he wrote.

"This is simply another delusion in my opinion, as library values are currently in a secular decline, never to return to cash flows seen during the heyday of DVD sales," Icahn concluded.

Unloading on Feltheimer, Icahn said he feared the Lionsgate CEO was determined to "swing for the fences" using excessive debt and risking the shareholders' equity.

Executives at Lionsgate responded to Icahn's letter with a written statement of their own that said, in part, "Mr. Icahn is simply attempting to distract shareholders from the obvious -- his offer price is woefully inadequate."

Lionsgate also accused Icahn of flip-flopping in the last year on key business strategies, including discussing with company management last summer a possible run at MGM that might include Icahn partially financing the transaction, and now challenging Lionsgate's interest in library catalogs.

Lionsgate also said Icahn was initially critical of the acquisition of TV Guide Network and TVGuide.com, and has since "praised Lionsgate's management for many of its decisions, including the acquisition of TV Guide Network and TVGuide.com."
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