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July 21, 2010 by · Leave a Comment 

After a 10-day lull in the trench warfare between the management of Lions Gate Entertainment and activist investor Carl Icahn, the two sides resumed the battle on Tuesday. Firing the first shot, Icahn launched a new hostile bid to gain control of the company, this time offering $6.50 for the shares, which had dropped from $7.15 on July 1 to $6.03 on Monday. Shares in the company immediately shot up, closing the day at $6.56. Lions Gate fired back shortly after the markets closed. In a move aimed at diluting Icahn’s position, it converted $100 million in debt to 16.2 million new shares, thereby reducing Icahn’s take to about 33.3 percent from 38 percent. Although not strictly speaking a poison pill defense, it does dilute the value of other shareholders’ stock. Lions Gate said in a statement that its move was aimed only at reducing its total debt.
Icahn fired back this afternoon (Tuesday), saying in a statement that he intends to sue Lions Gate for violating the 10-day truce. “Not only has Lions Gate’s board diluted the company’s shareholders in an attempt to entrench themselves, but it has violated the agreement it made with us, which among other things prohibited Lions Gate from issuing stock during this period,” Icahn said in a statement. “We intend to litigate.” It was also disclosed that the new shares had been converted from debt held by one of Mark Rachevsky’s investment funds. Rachevsky had been the largest stockholder in Lions Gate until Icahn made his move to gain control of the company.