UPDATE 3-Icahn increases offer for Lions Gate; shares jump

* Icahn ups Lions Gate bid to $7/share from $6/share

* Icahn says he intends to replace board with own nominees

* Lions Gate shares jump more than 8 percent

* Mark Cuban discloses he has 5.4 pct stake

* Lions Gate says to review offer
(Adds Cuban was was on Icahn’s Yahoo proxy slate)

By Sue Zeidler

LOS ANGELES, April 15 (BestGrowthStock) – Billionaire activist
shareholder Carl Icahn on Thursday raised his hostile bid for
independent studio Lions Gate Entertainment Corp (LGF.N: ) by 17
percent to $7 a share from $6.

Icahn’s latest offer — for the 81 percent of Lions Gate he
does not own — values Lions Gate’s equity at $825 million.

Analysts put the entire value of Lions Gate, including debt
and equity, at about $1.3 billion.

Lions Gate in response to Icahn’s latest bid on Thursday
said it will review the offer and make its recommendation to
shareholders promptly.

Separately, billionaire entrepreneur Mark Cuban disclosed
in a U.S. Securities and Exchange Commission filing that he now
holds a 5.4 percent stake in Lions Gate.

It was unclear what Cuban’s motivation in taking a stake in
Lions Gate was, but Icahn back in 2008 enlisted the tech mogul,
owner of the Dallas Mavericks, and chairman of HDNet, to a
proxy slate to run against Yahoo Inc’s (YHOO.O: ) then current
board to pave the way for a Microsoft-Yahoo merger.

The long-running battle with Yahoo ended in July 2008 when
Icahn was given a seat on the board, but he never succeeded in
getting the company sold to Microsoft.

Icahn was unavailable and Cuban declined comment.

Icahn has held Lions Gate shares since 2006 and has been
frustrated with management and the stock’s lackluster
performance, which has fallen from a high of $12 in 2007. He
said he intends to replace Lions Gate’s board with his own
slate of nominees. The offering period will expire on May 14.

Lions Gate shares rose more than 8 percent to $6.90 in
after-hours trade after closing at $6.37 during the regular
session on the New York Stock Exchange.

Analysts and investors said Icahn’s new offer is likely to
be taken more seriously than the earlier $6 bid, which was
considered low by many. Still, some feel the latest bid is
still not high enough for the diversified studio, home to films
like “Precious,” the “Saw” film franchise and TV series “Mad
Men.”

Analysts said Lions Gate could command a price more in the
$8.50 to $9.00 a share range, with one suggesting the price for
the studio could be worth $8 to $12 per share.

“This is definitely getting more interesting,” said Piper
Jaffray analyst James Marsh. “I’d imagine that Lions Gate
thinks this bid is too low, but it’s clear that Icahn needed to
take this step,” he said.

Investor Richard Dorfman said the new bid showed Icahn was
not walking away. “I think this is further proof that Icahn is
serious in his quest to have Lions Gate acquired either by
himself or by another entity,” said Dorfman, managing director
for Richard Alan Inc, a media investment firm with a stake in
Lions Gate.

Regarding Cuban, Dorfman said he believed the billionaire
might be looking to profit from a sale of the studio.

“Cuban appears to be positioning himself to make a quick
and nice profit on what looks to be an ever more likely
acquisition of Lions Gate,” he said.

Icahn took Lions Gate’s management to task for seeking to
buy Metro-Goldwyn-Mayer and Walt Disney Co’s (DIS.N: ) Miramax in
recent months. Lions Gate withdrew from the bidding for MGM and
balked early on at the $650 million to $750 million price being
sought by Disney for Miramax, according to sources familiar
with the negotiations.

In a letter to Lions Gate shareholders on Thursday, Icahn
said he raised his offer price not because he believed $6 was
inadequate but because he felt it was necessary to make every
effort to protect his current investment in Lions Gate.

“We do not feel comfortable that existing management is the
right team to guide Lions Gate through this difficult period,”
he said in the letter.

Lions Gate has also recently invested in the TV Guide
Network and start-up online movie channel Epix.

Analysts like Marsh believe these investments will start to
pay off and that Lions Gate’s upcoming film “Kick-Ass,” is
poised to open strongly, which should help its hand.

“The timing is good to get people interested in Lions Gate,
but it’s also good to get Lions Gate to play hard to get,” said
Marsh.

Stock Report

(Editing by Bernard Orr)

UPDATE 3-Icahn increases offer for Lions Gate; shares jump