Icahn Extends Offer for Lions Gate - Analyst Blog

The billionaire investor Carl Icahn extended his deadline to acquire all the outstanding shares of Lions Gate Entertainment Corporation (LGF) till May 10, 2010. The previous tender offer expired on April 30, 2010. The investor is offering $7.00 per share in cash, up from its previous offer of $6.00, valuing the company at about $825 million.

Carl Icahn, who currently owns an 18.9% interest in Lions Gate, had earlier tried to increase his stake to 29.9%. He also made it clear that if he succeeds in his current takeover bid, he would replace the company’s top management and board with his nominees. Icahn informed that as of Friday he had acquired 6.6 million shares, or nearly 5.6% of outstanding shares, thereby increasing his current stake above 20%.

The investor had earlier pointed out that the current management is not fit to guide the company through the difficult period, as was evident from Lions Gate’s decision to bid for Metro-Goldwyn-Mayer and Walt Disney Company‘s (DIS) Miramax, both film libraries, amid shrinking DVD sales as more and more people are streaming the Internet for entertainment. Later, Lions Gate withdrew from the bid.

In a separate story, Lions Gate declared preliminary results for fiscal 2010, and portrayed adjusted EBITDA of more than $115 million, surpassing its previously announced guidance of $75 million by more than 50%, on the heels of robust television, library and home entertainment revenues.

The better-than-expected results will help Lions Gate to defend Carl Icahn’s hostile takeover bid. Management also hinted that the sustained growth in video on demand services also helped the company post healthy revenue and EBITDA.

Management hinted that Lions Gate will attain positive free cash in fiscal 2011, and said that the company remains on track to generate annual free cash flow between $100 million and $125 million from 2013 to 2015.

Lions Gate is a film studio, which produces and distributes motion pictures for theatrical and straight-to-video release, and television programming for the cable and broadcast networks.