Icahn Roars On Lionsgate

"Carl Icahn is very nice and friendly until he's not,"Lionsgate Vice Chairman Michael Burns said to me about the corporate raider's move on the movie studio. Well, it looks like the knives are drawn. The dance is heating up between the corporate raider and the independent studio, famous for its Tyler Perry and "Saw" franchises. Hollywood is watching for news on the next development, which reads like the second act of a courtroom drama. This contorovery has been weighing on LGF stock, keeping it from getting a piece of the market rally that lifted pretty much every other media stock this week.

The Hollywood audience is still waiting to see how Lionsgate will respond to the billionaire's offer Thursday afternoon to buy $325 million of Lionsgate's debt. A twist -- it's unclear how much he'd be willing to pay. Icahn says he doesn't advoacate selling the company but the buzz is that he wants to make the company far more fiscally conservative. Icahn has called Lionsgate's $250 million acquisition of TV Guide Network and TVGuide.com -- with cash -- as "bordering on recklessness." This all comes on the heels of the studio saying it would not accomodate Icahn's demands of choosing two directors for Lionsgate's board.

When it comes to its board, Lionsgate is in an odd position, because, believe it or not, it's Canadian. Yes, the movie studio with an office in Santa Monica, CA is Vancouver based, which means eight of its twelve board seats must be filled by Canadian residents. Lucky for Lionsgate, that allows it to protect its board.

So what's act three? I've chatted with some sources close to the company about a number of potential outcomes. Icahn, who controls 14.5 percent of LGF stock could easily team with the company's largest shareholder, Mark Rachesky, Icahn's former Chief Investment Officer, to stage a takeover bid. Will Icahn want to take the company private? Or just implement tigher financial controls? I've heard Icahn is interested in Lionsgate with privately-held MGM, which like Lionsgate, has a huge library.

But that raises the question of whether one of Lionsgate's greatest sources of strength -- it's huge library of more than 8,000 films and 4,000 TV shows -- has declined in value. We'll see what Icahn has up his sleve to monetize that library, once a massive cash cow. And can he stay nice and friendly? He used to have a great relationship with Lionsgate's management, it'll be interesting to see if it ends in a hostile takeover.

Questions? Comments? MediaMoney@cnbc.com