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Lionsgate vs. Icahn

Lionsgate vs. Icahn

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Published by: The Wrap on Oct 28, 2010
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02/01/2014

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mDGEBAER
UNITEDSTATES
DISTRICTCOURTSOUTHERNDISTRICTOF
NEWYORK
----------------------------------------------------------------------------
)(
LIONS
GATEENTERTAINMENT
CORP.,
"
.
Plaintiff,vs.
CARL
C.
ICAHN,BRETT
ICAHN,
ICAHN
PARTNERS
LP,
HIGHRIVERLIMITED
PARTNERSHIP,
HOPPER
INVESTMENTS
LLC,BARBERRY
CORP.,
ICAHNONSHORE
LP,
ICAHNOFFSHORE
LP,
ICAHNCAPITAL
LP,
IPHGP
LLC,
ICAHNENTERPRISESHOLDINGS
L.P.,
ICAHNENTERPRISES
G.P.INC.,
and
BECKTON
CORP.,Defendants.
----------------------------------------------------------------------------
)(
COMPLAINT
Plaintiff
Lions
Gate
EntertainmentCorp.("Lionsgate")
by
itsundersignedcounselalleges,
uponknowledge
asto
itself
and
its
own
acts
andupon
information
andbelief
astoallothermatters,asfollowsagainst
Carl
C.
Icahn
("Icahn"),BrettIcahn,
and
the
other
defendants
named
above
(collectively,the
"Icahn
Group"):
OVERVIEW
1.
InMarch
20
I0,corporateraiderCarlIcahndeclaredhisintenttotakecontrol
of
Lionsgate,a
leading
independentfilm
and
televisionstudiothatproducescriticallyacclaimedhitssuchastheOscar-winning
Precious
and
the
Emmy-winning
"Mad
Men."
Icahn
based
his
campaign
forcontrol
on
thechargethat
Lionsgate's
managementwasimprudentlypursuing
merger
transactions,aboveall
whathe
characterizedasa"misguidedstrategy"
of
acquiringlegendaryfilmstudioMetro-Goldwyn-Meyer,Inc.
("MGM")
that
would
end
in
"oblivion"
and
"bankruptcy."2.
It
turns
out
that
Icahn
has
been
misleadingLionsgate
and
itsshareholdersallalong.
Whileurging
Lionsgateshareholderstosupporthistakeover
campaign
-either
by
tendering
theirstock
or
supportinghis
planned
proxy
contest-toensure
that
Lionsgate
didnot
 
pursuewhathecalleda"delusional"MOMtransaction,Icahnwasquietlyamassingahugepositionin
MOM
debtwiththeundisclosedintention
of
reapingprofitsfrombothsidesinaneventualmerger.Now,havingacquiredsubstantialholdingsinbothMOMdebtandLionsgateshares,heisaggressivelypromotingamergerbetweenLionsgateandMOM.3.
In
short,atthesametimeIcahnwastellingtheinvestingpublicthataLionsgate-MOMtransactionwould
be
afinancialdebacle,hewassecretlyplottingtomergethetwostudios-butonly
after
hehadacquiredasufficientlylargepositioninbothcompaniesatdepressedpricestoensurethathemaximizedhisownprofits.4.
In
March,shortlyaftertheIcahnOrouplauncheditsfirsttenderofferforall
of
Lionsgate'soutstandingshares,Icahnbeganpubliclyattackingthepossibility
of
amergerbetweenLionsgateandanotherfilmstudio.Herepeatedlyridiculedtheidea
of
amergerbetweenLionsgateandMOM,astoriedstudiowithavastfilmlibrarybutfewnewmoviesinitsproductionpipeline,likening
it
to"tyingtwoone-leggedmentogether."AndinJune,awarethatLionsgatewastheninadvancedmergernegotiationswithtwostudios,hepubliclythreatenedtosueanycompany(includingMOM)thatenteredintoatransactionwithLionsgate-because,hesaid,adealwithathirdpartywouldinterferewithhisplantogaincontrol
of
Lionsgate.Thetalksfellapart.5.RecentdevelopmentshaverevealedthatIcahnwasplayingadoublegame.WhilepubliclydenouncingamergerwithMOM
as
foolishand
MOM
itself
as
adinosaurwithadecayinglibrary,Icahnwasbuyingup
MOM's
privatelytradeddebt.
By
theearlyfall,hehadamassedmorethan10%
of
MOM's
approximately$4billionindebt-enoughtogivehimaprominentvoiceamongthecreditorsrunningthefinanciallydistressedstudio.Atthesametime,throughhistenderoffers,heincreasedhisstakeinLionsgatefromapproximately19%inMarchtoapproximately33%
by
lateSeptember.
6.
IcahnestablishedthispositioninLionsgate
by
falselytellingLionsgateshareholders
he
wouldblockan
MOM
dealas"delusional."Millions
of
Lionsgateshareswere
-2-
 
tenderedintothe!cahnofferonthatbasis.Butitwasnottrue.!cahnwasinfactprivatelyplanning
to
orchestrateanMOMtransactionforhisownbenefit.
7.
!cahnopposedamergerwithMOMnotbecauseitwasbadforLionsgateshareholders,butbecauseitwasgood-sogood,infact,thathewantedtopostponeituntilhecouldbuyasmuch
of
bothcompaniesashecouldandthusextractforhimselfasmuch
of
thevaluestemmingfromthemergeraspossible.Similarly,histhreatstosueLionsgate'spotentialmergerpartnerswerenothingmorethanblockingtacticsdesignedtoprecludeatransactionuntil!cahncouldreapthemaximumfinancialbenefitforhimself.BypubliclycriticizingaLionsgateMOMmergerandbullyingpotentialmergerpartnerswhilefailingtodisclosehisownpurchases
of
privatelytradedMOMdebt,!cahnkeptLionsgateshareholdersinthedarkabouttheultimatelikelihoodandvalue
of
amergerbetweenLionsgateandanotherstudioandmisleadinglyinducedthemtotendertheirsharesintohisinadequatetenderoffer.
8.
Completelycontradictinghispriordisclosures,!cahnhasnowlaunchedafull-courtpresstocause
MOM
tomergewithLionsgate.OnOctober12,!cahnfinallyadmittedthatheholdsa"significantposition[]"inMOMdebt.Andwithinthepastweek,!cahnhasmadeaseries
of
offerstootherholders
of
MOMdebt
to
acquireeffectivecontrol
of
MOM,withtheapparentintent
of
engineeringanMOM-Lionsgatedeal.Theseactionsconfirmthat!cahnhasbeenseekingcontrol
of
Lionsgatewithanundisclosedplan
to
completeanMOM
transaction-
theverytransactionheridiculedformonths-ontermsthatbenefithimasamajorMOMdebtholder.But!cahnstillhasnotdisclosedmaterialinformation
to
whichshareholdersconsideringhispendingtenderofferorhisproxysolicitationsareentitled.Lionsgateshareholdersarebeingasked
to
decidewhethertohand!cahncontrol
of
theircompany.TheyareentitledtoknowallmaterialfactsabouthisplansandproposalsforLionsgate,includinghiscourse
of
dealingin
MOM
debtorothersecurities,histrueviewsandintentionsregardingapotentialMOMtransaction,andtheextenttowhichhisfinancialinterests,asamajorMOMdebtholder,arenotalignedwiththose
of
ordinaryLionsgateshareholders.
-3-

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