Icahn Drops Bid For Lionsgate Entertainment

Billionaire investor Carl Icahn abandoned a proxy fight for control of independent filmed entertainment studio Lionsgate Monday on the eve of the company’s annual meeting. But he seemed to leave the door open for another bid. Lionsgate shares closed 4.7 percent lower at $7.09 in Monday trading.

Icahn’s $7.50 per share bid for Lionsgate expired Friday. It had been conditional on issuance of a preliminary injunction barring board member Mark Rachesky’s firm from voting shares that were issued in July. Rachesky acquired the shares in a debt-for-equity transaction.

New York Supreme Court Justice James Yates last week rejected Icahn’s motion for the order, saying the investor hadn’t proven he would be harmed if an injunction wasn’t granted. And Icahn didn’t have a “property interest” in Rachesky’s shares, regardless of commitments he had from Lionsgate during 10 days in July leading up to the debt-for-equity deal, Yates ruled. But the judge also agreed to hold a full trial in the “next few months” and he’s requiring Lionsgate to hold another shareholders meeting in September after his ruling, Icahn said in an SEC filing.

"We will continue to monitor the situation at Lionsgate and will aggressively take all actions necessary to protect our investment and we reserve all our rights with respect to Lionsgate and its securities,” Icahn said in the filing. He will keep a 33 percent stake in Lionsgate that he has built since starting to buy its shares in February 2009. Lionsgate’s transaction with Rachesky lowered Icahn’s stake in the company to 33 percent from 37 percent. But the transaction also cut Lionsgate debt $100 million and “supported the best interests of the company and its shareholders,” Lionsgate said in a statement.

It wasn’t clear how Icahn’s move will affect his attempts to merge the studio with MGM. Icahn owns more than 14 percent of MGM’s debt and will become a major shareholder when it emerges from a pre-packaged bankruptcy this month. MGM is partners with Lionsgate and Viacom in the Epix channel. Lionsgate also has expressed interest in acquiring MGM Lionsgate and has spent $55 million defending itself against Icahn, including $4 million in Q2 ended Sept. 30 (CED Dec 7 p3).