Icahn Sues Lionsgate

NEW YORK: Carl Icahn has filed a lawsuit against Lionsgate over a debt-to-equity deal that reduced his stake in the studio from 37.9 percent to about 33 percent.

Last week, Icahn restarted his takeover efforts of Lionsgate, with a tender offer of $6.50 per share in a move to up his current holdings. Lionsgate retaliated by arranging a dept-for-equity swap—with MHR Fund Management, an investment fund run by Mark Rachesky—which converted about $100 million of its debt into 16.2 million new shares. The move not only reduced Icahn’s holdings but it put Rachesky, a Lionsgate director, in charge of 28.9 percent of the company’s shares. 

Lionsgate said the move was part of its longstanding effort to reduce its debt load. Icahn called the deal a “sham transaction” in his legal filing.

“These transactions, in which the board of directors of Lions Gate provided stock that was acquired by Mark Rachesky at the bargain price of $6.20 per share, after recently advising all Lions Gate shareholders not to accept my previous tender offer of $7.00 per share because the price was allegedly ‘inadequate,’ have the effect of insulating the existing directors and management from a proxy fight, as well as enriching one director at the expense of all shareholders,” Icahn said in a statement.

He added, “We view this transaction as a prime example of scorched-earth tactics executed with other people’s money—in this case, the money of Lions Gate shareholders—and they will be met with an equally forceful response.”