Carl Icahn Attacks Lions Gate's Scorched Earth Strategy To Block Buyout

Carl Icahn attacked Lions Gate's (NYSE:LGF) "scorched earth" strategy to rebuff his takeover offer, suing the studio, and seeking a "permanent injunction rescinding the note exchange and the issuance of shares" that would reduce his stake in the studio to 33.5% from 37.9%.

Icahn also said he wants to be paid punitive damages.

Mr. Carl C. Icahn stated: "These transactions, in which the board of directors of Lions Gate provided stock that was acquired by Mark Rachesky at the bargain price of $6.20 per share, after recently advising all Lions Gate shareholders not to accept my previous tender offer of $7.00 per share because the price was allegedly 'inadequate', have the effect of insulating the existing directors and management from a proxy fight, as well as enriching one director at the expense of all shareholders. I find this scheme especially reprehensible in light of the fact that the board recently advised shareholders that the shares were worth $8.85 per share. If Lions Gate truly wants to 'deleverage,' it should issue its stock in a rights offering open to all shareholders and use the proceeds to retire debt, rather than issue stock to one director, namely Mark Rachesky, at a bargain price. It is interesting to note that Mark Rachesky has a history of attempting to use his power and control to enrich himself and entrench his own position at the expense of other shareholders. In a recent case involving Loral Space & Communications, Inc., the Delaware Court of Chancery invalidated a financing agreement entered into between Loral and one of Rachesky's investment funds because the agreement was not the product of arm's-length negotiations and its terms were unfair. Unlike many other shareholders, whom the Lions Gate directors seem to cynically assume must either suffer the board's rapacious tactics in silence or sell their shares, I am fortunate enough to have significant resources with which to protect my interests, and I will spare no expense in holding the culpable parties responsible for their behavior. We view this transaction as a prime example of scorched earth tactics executed with other people's money - in this case, the money of Lions Gate shareholders - and they will be met with an equally forceful response."

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[TAXtheAtheist]

Carl Icahn = Bernie Madoff.