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Are Icahn and Lionsgate Talking Again?

It seems that quiet communications have restarted between that rapacious takeover king Carl Icahn and the plucky but still vulnerable Lions Gate Entertainment.

What gives? Here’s the lay of the land: Barely two weeks ago, Icahn began rattling his saber, tendering an offer to buy $325 million in debt from Lionsgate bondholders, with a gimlet eye on exerting more control over the company.

This came just after the collapse of talks between Icahn and Lionsgate top executives Jon Feltheimer and Michael Burns. Icahn wanted two board seats. He didn’t get them. So he began making moves that looked like the beginnings of a takeover battle.

But Icahn can’t afford to lose this one. Having tried to launch a proxy battle to remove Yahoo’s board of directors last year and lost; having launched a lawsuit against Motorola to force a sale of its mobile business and lost — the aging tiger needs a win.

Icahn has been making the requisite moves and public noises that feel like a prelude to a takeover bid. He has bought up 14.5 percent of the stock. He has tendered the aforementioned debt offer. And he has accused the current management of overspending on purchases like TV Guide for $255 million, and on cushy operating costs of $125 million a year.

But Feltheim and Co. have been aggressively countering Icahn’s moves. They hired a bunch of expensive lawyers, investment bankers, and publicists. They trimmed 8 percent of their workforce, eliminating 45 jobs late last month in a move to cut overhead.

And they’ve allowed it to be known that they are negotiating with several potential partners to sell half of the TV Guide investment either to a bank or to a content producer, according to one knowledgeable executive.

Meanwhile, a parade of investors and debt-holders have suddenly emerged to express confidence in the current management team. Mark Rachesky, a former employee of Icahn who owns 20 percent of Lionsgate, came out with a statement of support for the current regime. So did investor Gordon Crawford.

The largest debtholder, John Kornitzer, has publicly stated that he will not sell any debt to Icahn, and furthermore he wished the activist investor would “go crawl under a rock.”

So what looked like a ripe target three weeks ago suddenly looks like much more treacherous takeover terrain in early April. Icahn may well be reconsidering his options, and one executive close to the situation told me that communications have restarted over the board seats that were originally the cause for concern.

Icahn did not respond to emails asking for confirmation of renewed talks.

Previously: The Battle for Lionsgate Heats Up: Icahn Moves, Felt Countermoves