Lionsgate has a new Tyler Perry film opening this weekend. But that's not what Hollywood and Wall Street are buzzing about when it comes to the movie and TV industry's biggest independent studio.
One of the investment community's most feared corporate raiders -- Carl Icahn -- has taken center stage as he continues to snap up shares in the company behind the Tyler Perry and "Saw" movies and the cable shows "Mad Men" and "Weeds."
Icahn has more than doubled his holdings in Lions Gate Entertainment Corp. over the last year, and since Feb. 10 has upped his stake three times. He now owns almost 13%. The company, usually admired as a savvy and disciplined operator in the high-risk movie and TV business, has come in for a pounding from investors after reporting dismal fiscal third-quarter results and the collapse of a key film financing agreement.
Icahn's investment moves come when entertainment and media companies have fallen out of favor on Wall Street. Movies are a mature business with limited growth prospects, once-hot DVD sales are on a slide and the market for scripted television programs is shrinking.
But people who say they are familiar with the activist shareholder's designs believe that he is doubling down on Lions Gate because he sees an opportunity to acquire undervalued shares on the cheap -- and profit in the event of a sale of the company.
An investor in Lions Gate since 2005, Icahn increased his stake Oct. 20, when shares closed at $7.37. The stock has trended downward since. It hit a 52-week low of $3.90 on Feb. 10. The shares closed Friday at $4.20.
Icahn could be doing little else than buying into the game plan of Lions Gate Chief Executive Jon Feltheimer and Vice Chairman Michael Burns, who have built up the studio through strategic acquisitions of film libraries, production and distribution companies, and, most recently, a pending deal to buy cable network TV Guide Channel.
Such acquisitions could make the company more valuable as a takeover target of a bigger rival.
"Carl has one agenda: He wants to make money," Burns said. "Also, he's a firm believer in content and he knows we're an increasingly diversified entertainment company focused on content and distribution."
The normally impatient Icahn might have to wait out his Lions Gate investment. A sale any time soon seems unlikely given the distressed state of the financial markets and the problems of potential suitors such as Metro-Goldwyn-Mayer and CBS Corp.
