Carl Icahn lost another round Monday in his hostile takeover battle with Lionsgate. But the maverick investor is still maneuvering on the MGM front in what appears to be an effort to push forward on his proposed merger of Lionsgate and the Lion.
On Monday, the British Columbia Supreme Court tossed out Icahn’s petition seeking to invalidate Lionsgate’s $100 million debt-to-equity swap that reduced his stake to 33.5% from 38% in July. Icahn had no immediate response to the court’s ruling.
Icahn is in the midst of pushing to revamp terms of MGM’s pre-packaged bankruptcy filing, including a pledge of good-faith negotiations for a possible Lion and Lionsgate merger. Although Icahn’s moves are said to have delayed MGM’s filing, which comes on the heels of Friday’s vote of debtholders, it is expected by week’s end (Daily Variety, Nov. 1).
The Canadian court rejected Icahn’s challenge of Lionsgate’s effort to keep him at bay by diluting his ownership position.
“In my view, the Icahn Group complains of conduct which affects it not as a shareholder but a bitter bidder,” wrote Justice John Savage in a 70-page opinion. “It therefore does not have the standing to bring this application.”
Icahn had filed the petition in Vancouver and a lawsuit in New York over the debt-to-equity transaction against Lionsgate, its board and Mark Rachesky, who bought the converted shares from the company in July and saw his stake grow to 29% from 19.9%. Also named in the action were Kornitzer Capital Management and John Kornitzer, who has supported Lionsgate management.
Savage also said the Lionsgate board’s views on dealing with Icahn — who’s been in the midst of a hostile takeover attempt of the minimajor — were “reasonably held to be in the best interests of the company.”
The Rachesky deal was announced July 20 — a day after the 10-day truce between Lionsgate and the investor ended. At that point, Icahn had launched another hostile tender offer at $6.50 a share and promised that he’d follow through on his promise of a proxy fight to gain control of the Lionsgate board.
Icahn alleged that the “scheme” would insulate the directors and management from having to face a fair election at the coming annual meeting of Lionsgate’s shareholders. That meeting has still not been set.
Icahn has noted that stock was acquired by Rachesky at the “bargain” price of $6.20 per share in the wake of Lionsgate advising all its shareholders not to accept his previous tender offer of $7 per share because the price was allegedly “inadequate.”
For its part, Lionsgate has repeatedly called Icahn’s tender offers “financially inadequate and coercive.”