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Analysts warn of effects of Icahn’s bid for Lionsgate

Analysts have warned that Carl Icahn increasing his stake in Lionsgate could financially strain the company.

Moody’s this week warned that Icahn increasing his stake and a change in control of the ownership of Lionsgate would be a negative for the company given his lack of experience in the TV and film business and his track record as a corporate raider.

Moody’s senior VP Neil Begley said a successful Icahn offer would put pressure on Lionsgate’s credit rating. Icahn’s involvement could allow lenders to call in debt payments early or change the terms on which they lend to Lionsgate, he added.

Begley noted that Icahn’s involvement could increase the company’s risk profile “given his lack of expertise in the film and television production business and his history of more aggressive shareholder friendly activities.”

Last week Icahn made an unsolicited bid to up his share in the company. He wanted to buy another US$100 million of shares at US$6 per share in an offer the company said was “financially inadequate and coercive and is not in the best interests of Lions Gate and its shareholders and other stakeholders.”

CEO John Feltheimer added “We are confident we can better serve our shareholders by continuing to execute our strategic business plan, and the acquisition of effective control by the Icahn Group would significantly jeopardize that plan.”

Having gradually increased his share, Icahn now owns about 18.9% of Lionsgate and last week’s offer would have taken it to almost 30%.