Carl Icahn increases Lions Gate hostile takeover offer to $7 a share from $6

Carl Icahn has turned up the heat on Lions Gate Entertainment Corp.

The aggressive investor sent a letter Thursday to shareholders of the Santa Monica-based studio informing them that he had increased his offer to $7 a share from the $6 he proposed last month. His new bid values the company at $825 million, up from $707 million.

Icahn’s move comes in the wake of efforts in the last few weeks by Lions Gate management, led by Chief Executive Jon Feltheimer and Vice Chairman Michael Burns, to rebuff the hostile bid. The executives have frequently claimed that it doesn’t value their company adequately.

“We decided to raise our offer price not because we believed $6 per share to be inadequate but rather because we felt it necessary to make every effort to protect the investment we currently have in Lions Gate,” Icahn said in his letter. “We do not feel comfortable that existing management is the right team to guide Lions Gate through this difficult period.”

In a presentation for investors, Lions Gate management called Icahn’s $6-a-share offer “inadequate, opportunistic and coercive.”

Both sides have been lobbying shareholders over a vote scheduled for May 4 on a so-called poison pill the company has proposed that would make it significantly more difficult for Icahn to gain control. In his letter, Icahn urged shareholders in bold, underlines and capital letters to “vote against the poison pill!”

Lions Gate shares closed Thursday at $6.37, down 3 cents, implying that shareholders valued the company higher than Icahn’s offer from last month. On news of Icahn’s increased bid, the shares shot up to $6.93 in after-hours trading. That’s the highest since December 2008.

Management’s only response Thursday was a statement that its board would consider the new offer and make a recommendation to shareholders soon.

However, in a letter to employees sent Tuesday, general counsel Wayne Levin noted that some Wall Street analysts have set a price target for the company’s stock of $8.70.

Icahn’s offer expires April 30. In Thursday’s letter, he said he would give shareholders who reject his bid but don’t want to be part of a company he controls 10 additional days to tender their shares if he is successful.

ben.fritz@latimes.com