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Battling Carl Icahn: Lionsgate Rejects His Hostile Offer

Carl Icahn
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Carl Icahn

The power struggle between corporate raider Carl Icahn and studio Lionsgate is playing out slowly, with SEC filings and public statements lobbied back and forth.

Today Lionsgate officially rejected Icahn's hostile offer, saying it is "financially inadequate and coercive and its not in the best interests of Lionsgate and its shareholders and other stakeholders."

Lions Gate stock inched higher after the market opened, following the company's filing with the SEC saying that the board unanimously rejected Icahn's bid for up to 13.2 million shares for $6 per share. Icahn has slowly been building his stake in the company to 18.9 percent.

The timing of Icahn's offer and Lionsgate's push to reject it is key: the battle is escalating just ahead of binding, second-round bids for MGM are due on March 19. Lionsgate bid for MGM earlier this year, looking to build its library. But Icahn's bid comes with the condition that Lionsgate not make any acquisitions of $200 million or more without the approval of at least 40 percent of shareholders. MGM is worth somewhere around $1.5 billion, and Lionsgate does want to acquire it, for the right price.

The question now is whether Icahn will launch a proxy war to secure the largest share of the company, and how much he'll be able to accomplish before bids are due and MGM selects its acquirer.

What does Icahn want to do with Lionsgate if he secures seats on the board?

He clearly thinks the stock is undervalued. But usually when Icahn plays corporate raider and takes over a company he has some strategies to restructure or maximize profits. I was chatting with some entertainment industry bankers this week who pointed out to me that the entertainment industry is dramatically different than the sectors where Icahn usually treads, and there are no obvious strategies to boost Lionsgate's stock price.

Lionsgate has done a remarkable job of maximizing relationships with talent like Tyler Perry and franchises like Saw.

So what does Icahn think he can do?

Questions? Comments? MediaMoney@cnbc.com