Lions Gate Poison-Pill Ruling Appeal Dismissed by British Columbia Court

Lions Gate Entertainment Corp.’s appeal of a regulator’s ruling that voided a poison pill designed to thwart Carl Icahn’s hostile takeover bid for the film studio was dismissed by a British Columbia court.

A three-judge panel of the Canadian province’s Court of Appeal led by Judge Kenneth Smith today decided that last month’s ruling by the British Columbia Securities Commission wasn’t unreasonable and was in step with previous decisions by securities regulators.

“The Icahn group is very pleased with the decision,” said Mark A. Gelowitz, a Toronto-based lawyer representing the billionaire U.S. investor.

Peter A. Gall, a lawyer for Lions Gate, had argued the commission’s ruling wasn’t reasonable because voiding the poison pill would deny shareholders the right to act collectively to protect their interests. Gall declined to comment after today’s dismissal.

Lions Gate shares fell 16 cents, or 2.4 percent, to $6.56 in New York Stock Exchange composite trading. The shares have risen 13 percent this year.

The court’s upholding of the commission’s ruling removes one impediment to Icahn’s $7-a-share tender offer, which values the maker of “Saw” and “Tyler Perry” films at about $826 million. Lions Gate, based in Vancouver, is urging investors to reject Icahn’s bid.

Shareholder Rights

The poison pill, or shareholder rights plan, was designed to make a hostile takeover more expensive by offering investors additional stock at a discount. Voting on the plan was running 61 percent in favor, Lions Gate Vice Chairman Michael Burns testified April 26 at the commission hearing.

In a statement today, the securities commissions said it voided the film studio’s poison pill because it had “exhausted its usefulness and there was no justification for its continuation.”

Icahn has given stockholders until May 10 to sell their shares to him. About 6.56 million shares were tendered as of April 30, Icahn said. The company has about 117.8 million shares outstanding.

Icahn owns almost 19 percent of Lions Gate, which is run from Santa Monica, California. The poison pill was set to be triggered once he reaches 20 percent.

The securities commission’s original decision was issued after a 1 1/2-day hearing in Vancouver at which Icahn’s lawyers urged the panel to void the poison pill and Lions Gate’s lawyer pressed for a ruling allowing the shareholders to vote on the poison pill plan.

Legal Offer

The commission’s panel followed recommendations from its own lawyers, who said the poison pill would prevent the shareholders from responding to a legal offer.

Mark Rachesky, co-founder of MHR Fund Management LLC, and other investors publicly backing Lions Gate’s management hold 34 percent of the stock, according to Bloomberg data. They include Los Angeles-based Capital Group Cos., which owns 12.3 million shares, or 10.4 percent.

Today’s ruling by the three-judge panel was unanimous.

To contact the reporters on this story: Christopher Donville in Vancouver at; Joe Schneider in Vancouver at

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