Maker of DVDs to Weigh Proposal

DVD and compact disc producer Image Entertainment Inc. on Wednesday said it would consider an unsolicited takeover bid from Lions Gate Entertainment Corp., one of Hollywood’s largest independent film studios, and its stock shot up 47%.

Image, which licenses and makes DVDs and CDs sold at major U.S. retailers, said it was not for sale and contended that it was worth more than the Lions Gate offer. But it said a special committee of directors would study the proposal.

In an Aug. 30 letter to Image Chairman and Chief Executive Martin Greenwald, Lions Gate CEO Jon Feltheimer offered to swap 0.38 to 0.42 of a Lions Gate share for each share of Image.

At Lions Gate’s closing price of $10.15 on Wednesday, the bid is valued at $3.86 to $4.26 per Image share and would value Image at $82 million to $91 million.

Shares of Image traded higher Wednesday, vaulting to as much as $4.71 as investors bet that Lions Gate would increase its offer. The stock closed up $1.42, or 47%, at $4.42 a share.

Lions Gate already owns about 4 million shares of Image, a stake of about 19% of the company.

Lions Gate, which is based in British Columbia but has offices in Santa Monica, announced plans last year to make strategic acquisitions. In May, it considered, but then dropped, an effort to bid for British production company HIT Entertainment.

Image said Lions Gate was interested in the depth of its library of programs and films and its growing music business. The Chatsworth company said it would give Lions Gate’s proposal “all the consideration that it deserves.”

Lions Gate itself has been the subject of takeover talk during the last year, particularly in the wake of the sale of larger film studio and library Metro-Goldwyn-Mayer Inc. Lions Gate’s Feltheimer said in November that it got offers “all the time.”

Known for low-budget arthouse and horror movies, Lions Gate has released films including “Fahrenheit 9/11,” “Open Water” and “Crash,” and has a film library of 8,000 titles that includes the “Dirty Dancing” franchise.