Lions Gate Entertainment Corp and Carl Icahn traded angry barbs on Wednesday, one day after the movie studio rejected his hostile bid.

The company's shares rose 4 percent, and analysts said that was because an acquisition of Lions Gate, home to the Saw films and Mad Men TV series, was seen as becoming more likely, despite views that Icahn's $6-a-share bid was low.

Mr. Icahn is simply attempting to distract shareholders from the obvious -- his offer price is woefully inadequate, Lions Gate said in a statement.

The exchange between Icahn and Lions Gate comes as the billionaire tries to forestall a bid by the studio -- in which he already owns a stake of about 19 percent -- to acquire rival MGM.

To spend $1 billion on MGM is absurd, it's absurd for this company, Icahn said in an interview with CNBC. If you're Warren Buffett you can spend it, but these guys can't go spend $1 billion.

Icahn said in an open letter to Lions Gate Chief Executive Jon Feltheimer that the company's board had failed the studio, that Feltheimer himself has done little to benefit shareholders and that Lions Gate's stock price is an indication that something is wrong.

You claim that I offer no 'meaningful vision,' thereby implying that you have one, Icahn said. I cannot help but wonder why your 'vision' -- if so 'meaningful' -- never translated into shareholder value?

Lions Gate on Tuesday rebuffed Icahn's hostile bid to buy the portion of the company he does not own for $6 a share. The company's shares closed at $6.25 on Wednesday afternoon on the New York Stock Exchange, up 4.3 percent.

Icahn has to raise his bid if he's serious ... but I think he's putting into the investor and public mind-set that this company is a likely candidate for sale because we are in a consolidating industry, said Richard Dorfman, managing director at Richard Alan Inc, an investment firm in media and entertainment that holds a stake in Lions Gate.

Dorfman also tied the stock's rise to growing views that Lions Gate will not succeed in its own effort to buy Metro-Goldwyn-Mayer, because it will likely be outbid.

One of the reasons for the stock's move today was that it is becoming fairly obvious that Lions Gate is not going to get MGM. Views that they may have had been weighing on the stock price, said Dorfman.

Analyst David Bank of RBC Capital also said the shares rose in response to the very public sparring, which gave more credibility to Icahn's efforts.

I don't think he'd be successful at this price, but I think Icahn's trying to stir up interest from other potential bidders or raise support for his other strategic initiatives, said Bank.

WAR OF WORDS

Icahn argued in his letter that the board would be misguided should it sanction an MGM deal or a bid for Walt Disney Co's Miramax film unit, for which Lions Gate would need to borrow billions of dollars.

What is more, the value of MGM's library of films -- which includes the James Bond franchise -- is in a secular decline, never to return to cash flows seen during the heyday of DVD sales, he wrote.

I suggest that your directors have failed shareholders, he said.

Lions Gate said its board and management were committed to building shareholder value and said that while Icahn was openly critical last year of its purchase of TV Guide Network, he has since changed his stance.

Mr. Icahn praised Lions Gate's management for many of its decisions, including the acquisition of TV Guide Network and TVGuide.com, the company said.

The company added that it believes that TV Guide Network and TVGuide.com are worth more than what Lions Gate paid for it a year ago and expects them to generate $75 million in EBITDA within three years.

(Reporting by Sue Zeidler and Franklin Paul; Editing by Gerald E. McCormick, Steve Orlofsky, Gary Hill)

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