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Judge tosses Icahn’s Lionsgate suit

Activist shareholder wanted debt-for-equity swap rescinded

A New York judge on Wednesday dismissed a lawsuit brought last summer by billionaire shareholder activist Carl Icahn against Lionsgate Entertainment, asking that a debt-for-equity swap the mini-major executed be rescinded. The move diluted Icahn’s position in the company at a time when he was aggressively looking to take control of Lionsgate.

The decision by New York State Supreme Court Justice O. Peter Sherwood follows a similar dismissal of the same Icahn challenge by a court in British Columbia last November. Lionsgate is headquartered in British Columbia. Icahn is appealing that ruling. It is not clear whether he plans to appeal the New York decision. He did not return calls seeking comment Wednesday.

In July, Lionsgate said its second largest shareholder, Mark Rachesky’s MHR Fund Management, had swapped $100 million in debt for stock that reduced Icahn’s position in Lionsgate to 33% from 38%.

“Icahn’s tortuous interference claim stands at odds with prevailing law,” Sherwood wrote in his decision.

In December, a New York judge ruled that Rachesky could vote the shares he obtained in the debt-for-equity swap in a proxy vote at Lionsgate’s annual meeting. Shortly after that, Icahn announced he would abandon his proxy fight, in which he was looking to put his own slate of five directors on the Lionsgate board.

Icahn is still Lionsgate’s largest shareholder with a 33% stake, and MHR is No. 2 with a 29% stake.

Last week, a federal judge in Manhattan dismissed part of a lawsuit brought by Lionsgate against Icahn, alleging that the investor failed to disclose his own plans to merge Lionsgate with MGM, in violation of securities law. The suit also claimed that Icahn also failed to disclose his plans to buy the 5.4% stake in Lionsgate held by fellow billionaire Mark Cuban, the owner of the Dallas Mavericks.