Lionsgate fought off Carl Icahn at the 2009 lows and rode Hunger Games to the majors

By 2009 Lionsgate, the studio behind Saw, Precious and Mad Men, had a stock languishing in the low single digits after a run of flops. Carl Icahn spent five months buying until he held 37.9% of the company and relaunched a hostile bid at $6.50 a share, telling shareholders he wanted to break the company up.

Management's answer was financial jiu-jitsu. In July 2010 Lionsgate arranged for $105M of its subordinated notes to be bought and converted by a fund of director Mark Rachesky, diluting Icahn from 37.9% to 33.5% and helping build a 38% blocking stake with Capital Research. Icahn sued in New York to unwind the swap and failed; in August 2011 he sold his 44 million shares at $7, capitulating.

While fighting the raider, the company kept building. Its television arm grew from nothing to nearly $500M of revenue on capital-light cable series like Mad Men and Weeds, and its film slate stayed disciplined enough that only four films in a decade lost more than $10M. In January 2012 it bought Summit Entertainment, home of Twilight, for $415M — funded without issuing new stock.

The payoff landed that spring: The Hunger Games, made for about $80M plus $55M of marketing, opened to $152.5M domestically and more than $200M worldwide, more than doubling a share price that Icahn had exited at $7 the previous summer. Rachesky, now the largest shareholder at 35.74%, took the co-chairman's seat beside CEO Jon Feltheimer.

Hunger Games opened at $152.5M; Icahn's $7 exit was under half the March 2012 share price; Twilight's Summit bought for $415M without stock dilution

A capital-light TV business gave Lionsgate recurring revenue through the siege, so it never had to sell the studio on the raider's terms.

The debt-for-equity swap turned the note overhang into an aligned controlling shareholder instead of a refinancing crisis.

Pre-selling international rights and frugal budgets meant the franchise bet that followed carried little balance-sheet risk.

Summit's Twilight cash flows and foreign-sales machine arrived exactly when Hunger Games needed a platform to become a franchise.

When a raider circles a cash-poor studio, convert the debt he is betting against into equity held by an ally — then make the product bets that make dilution irrelevant.

The studio that Hollywood had openly questioned would survive finished 2012 with a doubled stock, a four-quadrant franchise in hand, and a second Hunger Games film slated for November 2013 that analysts expected to unlock the real merchandising and international bonanza. Icahn, who had sold for less than half the eventual price, was widely counted the battle's big loser, and Rachesky — Icahn's own former deputy — remained the company's dominant shareholder and co-chairman.