Icahn Withdraws Offer Ahead of Lionsgate Shareholder Vote

Lionsgate's battle with Carl Icahn comes to a head Tuesday at the company's annual shareholder meeting and today Icahn made a major decision to pull his $7.50 takeover offer for the company.

What does this mean? In Icahn's words, it's "now virtually impossible to prevail in the proxy contest" when shareholders vote on Icahn's five proposed directors for the board tomorrow.

Carl Icahn

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This is no surprise: Icahn's offer was contingent on New York State Supreme Court ruling in his favor on a suit to block Lionsgate from diluting Lionsgate's shares .

(Icahn controls about a third of Lionsgate shares but controlled 38 percent before it was diluted by a debt-to-equity swap.

Still, the battle is far from over — the billionaire investor said in a statement that he will "aggressively to take all action to protect our investment." The major proxy advisory firms are backing Icahn's push for change on Lionsgate's board. Egan-Jones offered full support for Icahn's five board nominees. Institutional Shareholder Services supported three of the five nominees. Glass Lewis did not support Icahn's proposed directors, but it recommended shareholders withhold support from CEO Jon Feltheimer.

And even after the vote at tomorrow's shareholder meeting (10 am Pacific tomorrow) this is sure to drag on further. Icahn said in a statement "We are pleased that the judge agreed to hold a full trial on the matter within the next several months and will require Lionsgate to hold a meeting of shareholders again in September 2011 following his ruling on the case."

No word yet on whether Icahn plans to attend tomorrow meeting. I'll be there reporting on the shareholder vote for CNBC and this blog.

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