By Allan Dowd
VANCOUVER, Oct 8 (Reuters) - Lions Gate Entertainment Corp's directors improperly schemed 'in the dead of night' to block Carl Icahn's hostile takeover bid, the billionaire U.S. investor charges in new court filings.
Icahn cites e-mails and PIN exchanges that he says show that a $105 million debt-to-equity swap the company announced in July was actually an attempt to dilute his holdings in Lions Gate, and not, as the company said, a move to reduce its debt load.
Icahn has offered $7.50 per share for Lions Gate, the Canadian-incorporated studio behind film and television hits such as 'Mad Men' and 'Precious'. The bid is valued at about $1 billion.
Icahn's lawsuit, filed in late July, asks the British Columbia Supreme Court to unwind the debt-to-equity deal between Lions Gate and another large shareholder.
'No hyperbole can truly capture what was accomplished by the management and directors of Lions Gate in the dead of the night on July 20, 2010,' Icahn's lawyers said in an argument filed with the court in Vancouver late Thursday.
Lions Gate, in its own court filing the same day, dismissed Icahn's legal brief as 'a good read' intended to generate 'tabloid headlines'. But the company said Icahn failed to show that Lions Gate's board did anything wrong.
'Apart from Icahn, not one shareholder has expressed dissatisfaction with the deleveraging transactions and many have communicated their support for the transactions,' Lions Gate's lawyers wrote.
In the July 20 transaction, $105 million of Lions Gate senior subordinated notes were purchased by an investment fund affiliated with MHR Fund Management, which is controlled by Mark Rachesky, a Lions Gate director and a significant shareholder.
The notes were then converted into 16,236,305 common shares, or about 11.9 percent of the company, at a price of $6.20 a share. At the time Icahn was offering $6.50 for the company's shares.
Icahn says the plan was 'hatched' by Rachesky and board Vice Chairman Michael Burns, who, he says, wrote in a private email to another board member that the objective was to 'dilute the shit out of him (Icahn)'.
Lions Gate says the directors were acting in the best financial interests of all the shareholders. Its legal brief takes swipes at what it says were Icahn past failures with entertainment investments.
Icahn, one of the world's most famous corporate raiders, started his bid to raise his Lions Gate stake in February, when he owned 18.9 percent of the company.
The July debt-to-equity swap slashed the stake he had built up over five months to about 33.5 percent from 37.9 percent.
Icahn has owned Lions Gate shares since 2006, and has criticized the board and management for poor cost controls that have hurt the company's share price. The company's shares closed up 13 cents at $7.46 in New York on Friday.
Although Lions Gate is now based primarily in California, it was founded in Vancouver and remains incorporated in Canada.
(The case # in British Columbia Supreme Court in Vancouver is S-105285)
(Reporting Allan Dowd, Editing by Peter Galloway) Keywords: LIONSGATE/ (allan.dowd@thomsonreuters.com; 1+604 664 7314; Messaging: allan.dowd.reuters.com@reuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
VANCOUVER, Oct 8 (Reuters) - Lions Gate Entertainment Corp's directors improperly schemed 'in the dead of night' to block Carl Icahn's hostile takeover bid, the billionaire U.S. investor charges in new court filings.
Icahn cites e-mails and PIN exchanges that he says show that a $105 million debt-to-equity swap the company announced in July was actually an attempt to dilute his holdings in Lions Gate, and not, as the company said, a move to reduce its debt load.
Icahn has offered $7.50 per share for Lions Gate, the Canadian-incorporated studio behind film and television hits such as 'Mad Men' and 'Precious'. The bid is valued at about $1 billion.
Icahn's lawsuit, filed in late July, asks the British Columbia Supreme Court to unwind the debt-to-equity deal between Lions Gate and another large shareholder.
'No hyperbole can truly capture what was accomplished by the management and directors of Lions Gate in the dead of the night on July 20, 2010,' Icahn's lawyers said in an argument filed with the court in Vancouver late Thursday.
Lions Gate, in its own court filing the same day, dismissed Icahn's legal brief as 'a good read' intended to generate 'tabloid headlines'. But the company said Icahn failed to show that Lions Gate's board did anything wrong.
'Apart from Icahn, not one shareholder has expressed dissatisfaction with the deleveraging transactions and many have communicated their support for the transactions,' Lions Gate's lawyers wrote.
In the July 20 transaction, $105 million of Lions Gate senior subordinated notes were purchased by an investment fund affiliated with MHR Fund Management, which is controlled by Mark Rachesky, a Lions Gate director and a significant shareholder.
The notes were then converted into 16,236,305 common shares, or about 11.9 percent of the company, at a price of $6.20 a share. At the time Icahn was offering $6.50 for the company's shares.
Icahn says the plan was 'hatched' by Rachesky and board Vice Chairman Michael Burns, who, he says, wrote in a private email to another board member that the objective was to 'dilute the shit out of him (Icahn)'.
Lions Gate says the directors were acting in the best financial interests of all the shareholders. Its legal brief takes swipes at what it says were Icahn past failures with entertainment investments.
Icahn, one of the world's most famous corporate raiders, started his bid to raise his Lions Gate stake in February, when he owned 18.9 percent of the company.
The July debt-to-equity swap slashed the stake he had built up over five months to about 33.5 percent from 37.9 percent.
Icahn has owned Lions Gate shares since 2006, and has criticized the board and management for poor cost controls that have hurt the company's share price. The company's shares closed up 13 cents at $7.46 in New York on Friday.
Although Lions Gate is now based primarily in California, it was founded in Vancouver and remains incorporated in Canada.
(The case # in British Columbia Supreme Court in Vancouver is S-105285)
(Reporting Allan Dowd, Editing by Peter Galloway) Keywords: LIONSGATE/ (allan.dowd@thomsonreuters.com; 1+604 664 7314; Messaging: allan.dowd.reuters.com@reuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.