Lions Gate, the studio for mega box office movie franchise "The Hunger Games", wins dismissal of lawsuit filed by its shareholders over thwarting a 2014 hostile takeover.
According to The Wrap, Lions Gate shareholders filed a class-action lawsuit because the company concealed an SEC probe that eventually thwarted a hostile takeover from billionaire Carl Icahn back in 2014. According to the obtained court papers in New York, "The Court has considered all of the remaining arguments of the parties. To the extent not specifically addressed in the Order, they are either moot or without merit. For the foregoing reasons, the Defendants' motion to dismiss is granted; accordingly, the case is closed."
Reuters reports that Belgium-based KBC Asset Management NV sued the studio after the latter agreed to pay $7.5 million to settle with SEC. However, U.S. District Judge John Koeltl in Manhattan said that the other party failed to show that the studio's disclosures with the SEC probe were materially false or misleading, or that Lions Gate has intentionally deceived them.
The lawsuit stemmed from several transactions made in July 2010 that boosted the stake of current chairman Mark Rachesky and diluted the stake of Carl Icahn. According to the SEC, what Lions Gate did was to mislead when they claimed that the transactions were meant to cut debt. Instead, the transactions were made to block a takeover, but it failed to get needed shareholder approvals. Lions Gate admitted wrong doing and paid the due to settle with the SEC.
Judge Koeltl, however, further impressed that "The more cogent inference is that Lions Gate did not specifically disclose the investigation until the settlement had been concluded because it did not believe that there was a requirement to do so."
According to The Variety, Lions Gate did not disclose the information that $100 million debt-to-equity swap has reduced Icahn's share to the company from 37.3% to 33.5%. Icahn has filed a lawsuit but eventually settled agreeing to cash out his stake for $7 a share or $310 million. The SEC has ordered the studio "cease and desist" from future violations.
Judge Koeltl also dismissed the filed claims against Lions Gate's chief executive and three officials.
