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All 12 Lions Gate board nominees elected -- a blow for shareholder Carl Icahn [Updated]

December 14, 2010 | 10:58 am

It was a clean sweep for Lions Gate Entertainment. Despite the aggressive and expensive proxy battle waged by dissident shareholder Carl Icahn, all 12 of the Santa Monica studio's management-supported nominees -- including 11 incumbents -- were elected by shareholders at Lions Gate's annual meeting in Los Angeles on Tuesday.

The vote count was not immediately available.

Icahn had nominated five directors for Lions Gate's board, including former Overture Films and Metro-Goldwyn-Mayer senior executive Chris McGurk, to advance his agenda of cutting spending on overhead and film production.

The billionaire corporate raider had acknowledged in recent weeks that his chances of winning were slim unless he could prevail in a legal battle to unwind a controversial debt-for-equity transaction this summer that increased the stake of Mark Rachesky, the company's second-largest shareholder and a supporter of management, from just under 20% to 29%. That deal also diluted Icahn's holdings from 38% to 32.8%.

But courts in British Columbia, where Lions Gate is legally domiciled, and in New York both refused Icahn's request to issue an injunction blocking Rachesky from voting his shares.

On Monday, Icahn admitted defeat in his proxy battle. That acknowledgement came in the wake of the expiration of the investor's $7.50-per-share hostile bid for all outstanding Lions Gate shares. Some believe that Icahn may at some point launch a new tender offer at a higher price, though he has not yet indicated such intentions.

For the last two years, Icahn has been a thorn in Lions Gate's side as he publicly lambasted its leadership and sought to seize control of the company and oust Chief Executive Jon Feltheimer and Vice Chairman Michael Burns.

The 2010 annual meeting was delayed until the very end of the year as Lions Gate and Icahn became embroiled in multiple lawsuits against each other. On-and-off talks throughout the year to reach a settlement giving Icahn some representation on the board of directors did not prove successful.

[Update, 2:45 p.m.: Daniel Ninivaggi, president of Icahn’s investment fund, attended on his boss’s behalf and said following the meeting that  he believed his side would have won if not for the Rachesky transaction.

“We believe the vote is a direct result of bad corporate governance,” Ninivaggi said.

In a statement issued later, Icahn said “We will continue to monitor the situation at Lions Gate and will aggressively take all actions necessary to protect our investment.”

Ninivaggi noted that Icahn is still pursuing legal efforts to unwind the Rachesky transaction in Canada and New York, despite the initial losses. “And the next shareholder’s meeting,” he added, “is only 10 months away.”]

-- Ben Fritz

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