Lions Gate sues Icahn

By Sue Zeidler

LOS ANGELES (BestGrowthStock) – Lions Gate Entertainment Corp sued Carl Icahn on Thursday alleging the billionaire interfered with its earlier efforts to merge with Metro-Goldwyn-Mayer and other studios, even as the two now proceed with a joint effort to effect a merger with MGM.

In a lawsuit filed in New York federal court, Lions Gate accused Icahn, who launched a hostile bid for the studio in March, of misleading its shareholders by charging Lions Gate’s management was “imprudently pursuing merger transactions” and characterized its pursuit of MGM as a “misguided strategy” that would end in oblivion.

In the court filing, Lions Gate said Icahn earlier this month completely contradicted his prior disclosures and has now launched a full-court press advocating a merger between MGM and Lions Gate.

The Lions Gate suit said Icahn was “secretly plotting to merge the two studios – but only after he had acquired a sufficiently large position in both companies at depressed prices to ensure that he maximized his own profits.”

The suit follows a disclosure by Icahn on Wednesday that he had bought more of MGM’s debt as he stepped up his effort to thwart a pending deal between MGM and Spyglass Entertainment, which faces a crucial vote on Friday.

These purchases are in addition to his recently announced tender and put offers for the loans. Prior to these efforts, Icahn was reported to have a debt position in MGM, worth an estimated $500 million.

A lawyer for Icahn declined to comment. Lions Gate declined to comment beyond the suit.

Lions Gate is seeking to make Icahn, who owns more than 30 percent of Lions Gate, unwind part of his position and stop him from purchasing more shares in the company.

MGM declined to comment on Thursday.

MGM, which has struggled with heavy debt after a leveraged buyout in 2005, on Monday sent a memo to creditors dismissing Lions Gate’s claims of synergies and cost savings outlined in its merger proposal, a source familiar with the matter told Reuters.

The studio favors a plan that calls for Spyglass chiefs Gary Barber and Roger Birnbaum to take over a slimmed down MGM after a prepackaged bankruptcy, the source said on condition of anonymity because the memo had not been made public. A prepackaged bankruptcy is a faster method of reorganizing than a typical bankruptcy filing.

(Editing by Andre Grenon and Steve Orlofsky)

Lions Gate sues Icahn