Canada won't block Icahn's Lions Gate offer

TORONTO (Reuters) - Canada won't stand in the way of Carl Icahn's offer to buy Vancouver-based Lions Gate Entertainment Corp (LGF.N) after the billionaire pledged to maintain the Hollywood studio's Canadian operations.

Icahn, one of the world's richest men, is locked in a battle to take over the company, best known for blockbuster productions like the "Saw" films and the "Mad Men" television series. Lions Gate operates mostly out of Southern California.

Under the Investment Canada Act, the Canadian Heritage Ministry must approve any transaction that could result in the acquisition of a Canadian cultural business by a foreigner.

"The investor has shown its willingness to promote Canadian cultural products," Heritage Minister James Moore said on Wednesday in a statement announcing the approval.

Icahn Group, the activist shareholder's investment vehicle, promised to maintain or increase Lions Gate's current employment levels and film production activities in Canada, Icahn said.

It was not immediately clear how many people are employed by the company in Canada or what portion of their production activities occur on Canadian soil.

While the approval clears another obstacle to his bid, the corporate raider still must sway Lions Gate shareholders, who have said his $7-a-share, hostile takeover bid undervalues the company.

Icahn's latest offer -- for the 81 percent of Lions Gate he did not own as of early April -- values Lions Gate's equity at $825 million.

Icahn has held Lions Gate shares since 2006, and has criticized management on the performance of the stock, which has fallen from a high of $12 in 2007 to around $7.

Now he plans to launch a proxy battle to oust the Lions Gate board.

Lion Gate shares were up 0.7 percent, or 5 cents at $7.05 in midday trade on Wednesday on the New York Stock Exchange.

(Reporting by Ashutosh Joshi in Bangalore and Pav Jordan in Toronto; Editing by Prem Udayabhanu and Frank McGurty)