Those who follow the events at Lions Gate Entertainment Corp. -- including the movie and television studio's own management -- might have expected "activist shareholder" Carl Icahn to wage a proxy war by now given his growling threats earlier this year.
But, with Lions Gate's annual shareholders meeting set to take place today in Toronto, where the Santa Monica-based studio is incorporated, Icahn never followed through on threats to nominate his own slate of directors.
Although Icahn has never articulated a game plan regarding his interest in the company behind the Tyler Perry and "Saw" movies and "Mad Men" TV series, media analysts attribute his relative silence recently to the possibility that the company's second-largest shareholder may have less to complain about these days.
"My guess is he has softened his activist stance a bit because the stock has been up since April and the company has responded to some of his complaints," said analyst David Miller, a managing director at Caris & Co. in Los Angeles. "Lions Gate was a much leaner company going into fiscal 2010."
In February, after two lousy quarterly results and after its stock had been battered, Icahn publicly scolded Lions Gate management for spending too much on overhead, production and marketing, as well as overpaying for the acquisition of TV Guide Network.
Since last year, the management team led by Jon Feltheimer and Michael Burns has cut overhead more than $20 million, including staff reductions of 8% in November and another 8% in the spring -- slashed some $200 million out of its operating budgets and sold a 49% stake in TV Guide Network. Although a portion of the cutbacks were in the works before Icahn's complaints, some were the direct result of his banging on the door.
It also helped that Lions Gate had its best quarterly box office results ever in the previous quarter with such hits as "Tyler Perry's Madea Goes to Jail" and "My Bloody Valentine 3-D" and better-than-expected results in its earnings period that ended June 30 thanks mostly to stronger TV revenue. Film revenue was off 26%, largely because the studio had only one release in the quarter.
Lions Gate's recent action thriller "Gamer," which opened Sept. 4, is no runaway hit. But last weekend the studio scored with its latest Tyler Perry film, "I Can Do Bad All by Myself," the eighth in the franchise, which opened at No. 1 with $23.4 million.
Icahn may also be pacified by the rebound in Lions Gate's stock, up 80% from a low of $3.65 on Feb. 11. It closed Monday at $6.51.
Alan Gould, an analyst with New York's Natixis Bleichroeder Inc., said that although "it's hard to know what's going on inside Carl Icahn's head, he's done a pretty good job buying the stock on dips." He suggested that Icahn is "probably making some money on his newer stock and has lowered his average purchase price."
Icahn, who has been an investor since early 2005 and now owns 17.8% of Lions Gate's stock, has been steadily increasing his stake since October, when he doubled his holdings to 9.2%. With just under 18%, he's right behind his former underling and investor chief, Mark H. Rachesky, who owns 19.8%.
Unlike Rachesky, a strong supporter of management whom Lions Gate recently nominated to its 12-member board, Icahn lost his bid for several board seats when talks broke down with management earlier this year.
Collectively, Lions Gate board members own nearly 25% of the outstanding shares, higher than is typical for a public company.
Analysts don't expect any fireworks at Lions Gate's meeting today, which if past years are any indication will be a sleepy pro-forma affair that won't draw a big crowd.
Some analysts believe that even though Icahn didn't wind up launching a proxy contest, he has had an effect as an activist shareholder.
"The threat of doing something was probably more powerful than actually doing something," said David Bank, an analyst with RBC Capital Markets in New York. "By proposing his own slate, it seems likely he would have been defeated. It's more powerful to hang in the wings and foment in the background."
One thing seems certain: Icahn isn't going away.
"I imagine he's looking for something transformative [like a merger with another studio such as MGM or an acquisition by a bigger media company] that would unlock shareholder value," Bank said.