Barbarians at the Lionsgate: Icahn Talks Break Down

There was more activity at the end of the week between Lionsgate and corporate raider Carl Icahn. Actually, the activity was inactivity. But we are learning more about the proposed deal and where it has apparently gotten off track. On Friday, Icahn spoke to The Los Angeles Times about his efforts to assume greater control over Lionsgates, of which he already owns about 15%. Icahn reportedly wants to install his 29-year-old son, Brett, on the board of directors along with a couple other organizational tweaks, and in return he'll gobble up the company's debt, which is roughly $325 million. Lionsgate countered by saying that Icahn can't buy any more stock (his former investment officer Marc Rachesky owns another 20% of The House That Tyler Perry Built) and they would give the younger Icahn a seat on the board without voting privileges. It might be that Icahn and Rachesky will simply wait it out and make a major move toward more authority between now and September's annual company meeting. After all, when news of Icahn's insterest in Lionsgate hit, the stock fell significantly, and in a week were there were plenty of media and enterainment gains on Wall Street. As we reported during the recent round of negotiations, Icahn has been collecting stock in the company since 2005, when the stock sold for about ten bucks a share. It's now down around $5, its lowest price since August 2004. But talks officially broken down on Thursday, and Icahn was more than happy to spill the beans. "It broke down because they refused to make the same standstill agreement applicable to any large shareholder they might give board representation to in the future." He added, "After spending all that time negotiating, I think it was shortsighted on their part." Icahn also pointed out one of Lionsgate's more curious business decisions, one we immediately questioned when it surfaced a couple months ago. On the subject of Lionsgate acquiring the now-obsolete TV Guide Network for $250 million, Icahn insisted, "I believe this borders on recklessness." Lionsgate executives have already announced plans to cut overhead at the film division, by releasing fewer movies each year and spending less on marketing to promote them. I wouldn't expect that to change if or when Icahn takes over the studio; streamlining the company's overhead is a primary reason he offered to pay off the debt in the first place. But with the break down in negotiations late this past week, it might be a few more months before we see a definitive conclusion to all of this. You have to admit, though, it's better drama than just about anything Lionsgate puts in theaters.