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Lions Gate is cutting jobs again

Under pressure, the Santa Monica studio eliminates 45 more positions, out of 550, after a similar move in November.

March 28, 2009|Claudia Eller

Amid continuing fallout from the tough economy and volatility of its movie and DVD business, Lions Gate Entertainment Corp. has slashed jobs for the second time in five months.

The Santa Monica-based movie and television studio is eliminating 45 positions, or 8% of its 550-person workforce, the company said Friday.

The latest downsizing included 27 people who were laid off Friday and 10 who were moved into independent contractor consulting jobs and production deals. Eight open positions will not be filled.

The cuts follow the elimination of 41 jobs in early November. Together, the cost-cutting moves are expected to shave $15 million to $20 million off Lions Gate's $135-million-a-year overhead.

Activist shareholder Carl Icahn, who owns 14.5% of Lions Gate stock and is threatening to launch a proxy war against the company, has been pushing management to slash what he views as excessive overhead costs at the company.

But even before Icahn became publicly vocal with that and other gripes he has with management, Lions Gate Chief Executive Jon Feltheimer and Vice Chairman Michael Burns had begun taking measures to reduce costs. The pair enacted a hiring freeze last summer and handed out pink slips in the fall.

It was then that Icahn began increasing his stake in the studio, buying the depressed stock on the cheap. Icahn's latest move was to tender an offer for all of the company's public debt. It's unclear how many sellers the corporate raider will find. Lions Gate's largest debt holder, John Kornitzer, has gone on record to say he refuses to sell Icahn a single bond and wishes the billionaire would "just go crawl under a rock."

Even Lions Gate knows that's a long shot and has armed itself with a heavy-hitting defense team of lawyers, bankers, and proxy solicitation and public relations firms to fend off Icahn.

The billionaire started becoming increasingly critical of Lions Gate after it reported two quarters of weak movie performances and lost its funding for three of its releases.

The studio has been in discussions about a deal with financier Ryan Kavanaugh's production company, Relativity Media, but it is apparently not a financing pact but a straight distribution arrangement whereby Lions Gate will be paid a fee by the producer for releasing its movies.

Meanwhile, Lions Gate is hoping that its latest release, "The Haunting in Connecticut," a supernatural thriller that came out this weekend, will continue its recent winning streak at the box office. The film follows Tyler Perry's "Madea Goes to Jail," which has grossed just under $90 million in the U.S., and "My Bloody Valentine 3-D," with $51 million.

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claudia.eller@latimes.com

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