Lions Gate, Icahn call 10-day truce

Lions Gate Entertainment and Carl Icahn are hitting the pause button on their battle for control of the movie and television production company.

They will spend the next 10 days searching for common ground on potential mergers and acquisitions, according to a letter sent to Icahn by Lions Gate Vice Chairman Michael Burns on Friday.

Since Icahn launched a $7-per-share tender offer to take over Lions Gate in March, the two sides have been at odds and frequently criticized each other in public letters, with Icahn saying the company spends too much on overhead and film production. Lions Gate has said Icahn’s offer is too low. Through his tender and public market purchases, Icahn has pushed his stake in the company to 38% from 19%.

Settlement talks never reached a conclusion, as Lions Gate was unwilling to give Icahn the level of power he wanted on the company’s board in exchange for backing off his bid.

However, Lions Gate executives apparently hope they can persuade Icahn to support specific merger or acquisition possibilities. The studio has been pursuing a merger with struggling Metro-Goldwyn-Mayer and previously discussed a deal with Summit Entertainment, the independent studio behind the “Twilight” films. Earlier this year, Lions Gate looked into buying Miramax Films, but Walt Disney Co.’s independent label is now set to be sold to an investor group led by construction executive Ron Tutor.

A merger with MGM would be complex, however, given that studio’s $4-billion debt. Nor is there indication that Lions Gate and Summit are close to a deal since they engaged in talks in late 2008.

Because of Icahn’s big stake, Lions Gate would need his support in any major corporate transaction.

During the 10-day pause period, Lions Gate has agreed not to issue more than 5% of its stock for any reason, the letter said, thus assuring Icahn that it won’t significantly dilute his holdings.

At the end of the 10-day period, if it is not extended, Lions Gate is to disclose all of the information it shares with Icahn. That way, the investor wouldn’t have non-public information that would prevent him from launching a new tender offer.

Lions Gate also said that for the next 45 days, it won’t set a date for its annual meeting of shareholders. Icahn has previously said he plans to nominate a slate of directors at the meeting to take control of the company.

ben.fritz@latimes.com