Lions Gate sues Icahn over proposed MGM merger
Lions Gate Entertainment Corp. and Carl Icahn’s tumultuous relationship has grown even more complicated.
The Santa Monica studio on Thursday filed a lawsuit against its largest shareholder in federal court in New York alleging that Icahn publicly opposed a merger between Lions Gate and Metro-Goldwyn-Mayer while secretly positioning himself to financially benefit from such a transaction.
The suit alleges that Icahn misled Lions Gate shareholders during tender offers to take over the company because he did not disclose that he was acquiring MGM debt. Since Lions Gate began pursuing MGM this year, Icahn has repeatedly criticized such a deal, at one point calling it “delusional.”
This month, however, Icahn changed his position, supporting a new merger proposal made by Lions Gate. The studio said in its lawsuit that he had not been honest about his motives.
Icahn “wanted to postpone [a merger] until he could buy as much of both companies as he could and thus extract for himself as much of the value stemming from the merger as possible,” the lawsuit alleged.
Icahn could not be reached for comment.
Lions Gate’s suit came one day before votes are due on an alternative plan for MGM to merge with Spyglass Entertainment. Icahn, who already owns more than 12% of MGM’s debt, is aggressively acquiring more
in an effort to block that deal.
The lawsuit is sure to provide ammunition to backers of the Spyglass proposal, who have argued that a Lions Gate merger is unwise because of the long-testy relationship between the studio and Icahn.
However, it may be no accident that Lions Gate filed its suit now. A decision is expected soon in a lawsuit that Icahn filed against the studio in Canada seeking to unwind a July transaction that reduced his stake from 38% to 33.5%. The investor’s current tender offer to buy more stock in Lions Gate expires Monday.
In its suit, Lions Gate asked the court to order Icahn to disclose to its shareholders what he intends to do with his growing MGM stake.
Additionally, Lions Gate is requesting damages on the grounds that Icahn’s threat in June to sue any company that entered into a transaction with the studio killed merger negotiations with MGM and another film company, believed to be “Twilight” producer Summit Entertainment.
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