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Lions Gate Looking For A New Image

14 Sep, 2005 By: Erik G., Holly W.

Lions Gate Entertainment has made an unsolicited offer for Image Entertainment, seeking to beef up its library and add music to the mix, but Image says it's not for sale.

In recent weeks Lions Gate has acquired 4,033,996 shares, or 18.98 percent, of Image Entertainment's stock, and said in regulatory filings that it believes acquiring Image “would be consistent with its desire to broaden and deepen its library of filmed entertainment, as well as to add an important musical component to its business, and to otherwise further [it]s business objectives and increase shareholder value.”

Image president and CEO Martin Greenwald said his company isn't for sale and characterized the unsolicited offer as too low.

"Over the last several years we have implemented a series of corporate initiatives in order to increase the value of our company. We have a long-term strategy designed by our board of directors and implemented by our exceptional management team. Management believes that the value of the company today and in the future is far greater than what is being offered," he said.

Image's board of directors has appointed a Special Committee to evaluate the offer.

David Miller, media analyst with Sanders Morris Harris, which covers both Lions Gate and Image, characterized the $80 million to $90 million stock offer as positive for both parties. He said Lions Gate would get additional bargaining power and supplier power with retailers while Image shareholders would get significantly increased stock value.

Cost savings under the merger could be $14 million a year, Miller said. “The deal looks on paper as being immediately accretative to free cash flow and net income,” he said.“In considering any business combination, we must determine what we believe to be in the best interests of the corporation. We have a duty to act in a careful and deliberative manner, and to be fully informed before making a decision,” Greenwald said. “We will act diligently and in due course. The proposal will be given all the consideration that it deserves.”

Citing a recent $15 million equity influx, the launch of Egami Media, acquisition of Home Vision Entertainment and an ongoing deal with the Criterion Collection, Greenwald said it is the current management acumen that makes Image an attractive target.

“Image has become a gemstone in the independent DVD world, with a growing business opportunity that has tremendous growth potential,” he said. Nonetheless, he said, “Our focus will continue to be on running and building our business. We have built strong relationships with our customers, vendors and licensors. We highly value the trust and confidence that our business partners have placed in Image Entertainment, and continuing to protect our ongoing relationships is of the utmost importance. We will continue with our long-term goals and look forward to continuing to build great things together.”

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