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Icahn admits defeat in Lions Gate proxy battle

December 13, 2010 |  7:42 am

After more than a  year of attempting to seize control of Lions Gate Entertainment, dissident shareholder Carl Icahn has admitted defeat -- at least for the moment.

Following a New York court ruling last week that made it harder for him to gather a majority of shares to vote for his nominees to Lions Gate Entertainment's board of directors, Icahn acknowledged Monday that he has no chance of prevailing in a proxy battle at this Tuesday's annual meeting.

"We recognize that it is now virtually impossible for us to prevail in the proxy contest due to the dilutive transaction in question," he said, referring to a controversial debt-for-equity transaction enacted during the summer that increased the stake of Mark Rachesky, the Santa Monica film and television studio's second-largest shareholder, to 29% from just under 20%.

The move also diluted Icahn, the company's largest shareholder, from 38% to 32.8%.

Rachesky is a supporter of current management and has opposed an effort by Icahn to elect five opposition members to the company's 12-person board in an effort to push his agenda of cutting costs and pulling back on film production in order to increase profits and shareholder value.

Icahn's statement came in an announcement that his tender offer to acquire Lions Gate stock for $7.50 per share had expired. One of the conditions was that the New York court grant his request for a temporary injunction, blocking Rachesky from voting the new shares he got in the summer debt-for-equity swap. That would have made it much easier for Icahn to gather enough votes to elect his nominees.

Icahn has been aggressively waging a battle to take over Lions Gate and push out current management, led by Chief Executive Jon Feltheimer and Vice Chairman Michael Burns. His statement Monday morning surprised many who had expected him to announce a last-minute move to bolster his long-running cause.

However, the billionaire corporate raider indicated that an expected setback Tuesday didn't mean he was ending his interest in shaking up Lions Gate.

"We will continue to monitor the situation at Lions Gate and will aggressively take all actions necessary to protect our investment," he said in his statement.

Icahn still encouraged shareholders to vote for his director nominees in order to "voice their dissatisfaction." A large vote against the management-supported nominees could still be a blow to the incumbent leadership of the company, best known for the Tyler Perry and "Saw" movies and the cable television show "Mad Men."

A Lions Gate spokesman did not immediately respond to a request for comment.

-- Ben Fritz


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