* Lions Gate's top shareholder supports management
* Mark Rachesky's MHR Fund seeking board seat
* Icahn lawyer: note tender docs to be available Friday (Adds analyst comment)
By Sue Zeidler
LOS ANGELES, March 18 Lions Gate Entertainment Corp's (LGF.N) largest investor, Mark Rachesky, has thrown his support behind the Hollywood film and television studio as it tries to fend off advances from his former boss, Carl Icahn.
Rachesky's MHR Fund Management LLC, which controls a 19.999 percent stake in Lions Gate, said in a regulatory filing on Wednesday it is "principally supportive" of the media company's "management and their publicly stated strategies."
The fund said it has had preliminary talks with Lions Gate about nominating a candidate to the studio's board. MHR added it may also talk to Lions Gate about "matters that may facilitate implementation of MHR's investment strategies and objectives."
Wall Street had been wondering whether Rachesky, a former investment chief to Icahn, would team up with the billionaire investor against Lions Gate, which produces the popular "Mad Men" cable TV show and "Saw" film franchise.
Doug Creutz, analyst with Cowen & Co, said the move by Rachesky appeared to be a blow to Icahn's efforts.
"It sounds like Rachesky's taking management's side, which was not necessarily expected. I think people figured he was working with Icahn, but if he's not, it significantly weakens Icahn's hand," Creutz said.
Icahn controls 14.5 percent of Lions Gate shares and is seeking to boost his influence over the company by offering to buy $325 million worth of its convertible notes.
"We expect our documents for the tender offer to become available to noteholders on Friday," said Keith Schaitkin, an attorney for Icahn, declining further comment.
If Icahn were to successfully buy the debt and convert it all into equity, his stake would double to about 28 percent to 29 percent. But analysts were skeptical Icahn would make that costly move because the conversion prices of the notes are far above Lions Gate's share price.
Icahn has criticized the studio's high expenses and its acquisition of the TV Guide cable channel and has threatened to mount a proxy battle and may call a special shareholders meeting to elect board directors.
"Icahn can still call a shareholders meeting, but his stake is smaller than Rachesky's and these sort of proxy fights are typically difficult to wage. Unless you have an overwhelming amount of shares at your disposal, they rarely succeed," said Creutz.
Lions Gate has hired an advisory team to launch a defense against Icahn. [ID:nN17296471]
Talks between Icahn and Lions Gate broke down last week after they clashed over certain aspects of a standstill agreement the studio demanded of the billionaire investor before giving him board seats.
If an investor's stake in Lions Gate exceeds 20 percent, it could trigger a change in control, which in turn could create problems with Lions Gate's credit facility under existing financing agreements.
The studio's library of more than 8,000 films and 4,000 TV shows is considered its most valuable asset, generating $275 million in annual revenue.
Shares of Lions Gate rose 9 cents, or 1.7 percent, to $5.40 a share in afternoon trading on the New York Stock Exchange. (Reporting by Franklin Paul and Tiffany Wu; Editing by Tim Dobbyn, Bernard Orr)