Lions Gate Entertainment Corp shareholders voted for all 12 of the company's board nominees in a victory against hostile suitor Carl Icahn, who had proposed a dissident slate.

The vote signaled the latest win and a potentially fatal blow against Icahn in Lions Gate's long and costly war with the billionaire shareholder, who launched a hostile $7.50-a-share bid and for years has criticized the management of the studio that makes Mad Men.

Lions Gate shares closed down 6.3 percent at $6.64 a share on the New York Stock Exchange.

Analysts said the stock fell on selling by investors who had bet on Icahn succeeding. The merger arbs (arbitrage investors) are probably unwinding on what looks like the end of the Icahn saga, said David Bank, analyst with RBC Capital.

But Icahn is not going away altogether, even though he has abandoned his tender offer. As long as he retains his 33 percent stake, Lions Gate's largest and most vocal shareholder is likely to keep pressuring the studio to cut costs and raise its stock price, pursue litigation against it and advocate for a merger between Lions Gate and storied studio Metro-Goldwyn-Mayer, the focus of more legal wrangling between Lions Gate and Icahn.

We are disappointed that shareholder democracy has failed -- or rather was subverted -- in the case of Lions Gate's annual meeting, said Icahn in a statement referring to a controversial debt-for-equity swap in July that effectively diluted his stake to 33 percent from 38 percent, hurting his chances in the proxy contest.

Icahn is seeking to unwind the swap; but Lions Gate last week gained an advantage when a New York judge denied Icahn's motion for an injunction to block Mark Rachesky, the company's second-largest shareholder, from voting shares he received in the transaction.

Icahn admitted on Monday it would be virtually impossible to win board seats after the court ruling but reiterated on Tuesday he was pleased there will be a full trial on the issue in the next few months, requiring Lions Gate to hold another shareholder meeting in September.

One of Icahn's nominees, Daniel Ninivaggi, was at Lions Gate's annual meeting and vowed to keep up the fight.

We believe the vote is the direct result of bad corporate governance, Ninivaggi told Reuters.

Icahn announced he would not buy any shares tendered in his offer, which expired on Monday, because the bid had been conditioned upon receipt of the injunction.

Icahn is also expected to keep pushing for a merger with MGM, but Lions Gate said that for now it was not interested.

We have said publicly that we were interested (in MGM) at one time, but for the moment that ship has sailed, said Michael Burns, vice chairman of Lions Gate, when asked whether the company would like to pursue a merger with MGM, which is expected to emerge from bankruptcy shortly.

In October, Lions Gate accused Icahn of secretly plotting to merge the two studios, but only after he acquired large stakes in both companies at depressed prices to ensure he maximized his own profits.

Earlier this month, MGM's reorganization plan won court approval, clearing the way for the studio to emerge from bankruptcy, and sources have said they expect the two studios to explore a merger.

(Editing by Gerald E. McCormick and Matthew Lewis)

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