Icahn ups Lions Gate bid, values studio at $1 bln

* Icahn offers $7.50 per share

* Lions Gate shares rise 12.5 pct on NYSE

* Offer values studio at $1 billion

(Revises first sentence, adds Lions Gate reaction, analyst comment, background, adds SAN FRANCISCO to dateline)

By Sinead Carew and Noel Randewich

NEW YORK/SAN FRANCISCO (Reuters) - Investor Carl Icahn increased his bid to buy Lions Gate Entertainment Corp Tuesday to $7.50 per share, valuing the company at $1 billion and sending shares up more than 12 percent.

Lions Gate, the studio behind film and television hits like "Saw," "Precious" and "Mad Men," had previously rejected a hostile bid Icahn made in July to buy it for $6.50 per share.

Vancouver-based Lions Gate shares were up 12.5 percent at $7.30 at midday on the New York Stock Exchange. The stock hit all-time highs of $12 three years ago.

Frustrated by the lackluster performance of Lions Gate shares, Icahn, one of the world's most famous corporate raiders, launched a bid in February to increase his 18.9 percent stake in the company.

But recent movies like "The Expendables" and "The Last Exorcism," and the Emmy Awards success of "Mad Men" have made Lions Gate more attractive, said Wunderlich Securities analyst Matthew Harrigan.

"They're clearly having some success at the box office. (Icahn) was trying to be very coercive in a circumstance where the economy was soft and the market was soft. I think he's having to pony up a little bit more now," Harrigan said.

Icahn, who now has more than 30 percent of Lions Gate, said in a statement that his latest offer would expire on Oct. 22, unless it is extended or withdrawn.

Lions Gate, with $327 million in sales in the latest quarter, said its board of directors would review the offer and recommended shareholders take no immediate action.

Icahn and his affiliates want to revamp the board of directors at Lions Gate, which they have criticized for poor cost control and mismanagement. (Reporting by Sinead Carew and Noel Randewich; editing by Gerald E. McCormick and Matthew Lewis)