(Updated: 6:00 p.m. PT)
Lionsgate is suing Carl Icahn, accusing the billionaire investor of playing a “double game” in which he alternately claimed to support and oppose a potential merger between the studio and Metro-Goldwyn-Mayer.
The latest legal wrangling could influence a vote Friday by MGM debtholders over whether to accept a pre-packaged bankruptcy plan that would see Spyglass take over the studio’s management.
In a suit filed Thursday in New York federal court, Lionsgate claims Icahn was "secretly plotting" to use the merger as a way to amass a larger slice of MGM’s debt and a bigger stake in the studio — at a discount.
"At the same time Icahn was telling the investing public that a Lionsgate-MGM transaction would be a financial debacle, he was secretly plotting to merge the two studios — but only after he had acquired a sufficiently large position in both companies at depressed prices to ensure that he maximized his own profits," the suit reads.
It's unclear how this latest round of legal gamesmanship will affect Spyglass chiefs Gary Barber and Roger Birnbaum and their own proposal to takeover as MGM co-CEOs after the studio emerges from Chapter 11.
Some debtholders have quietly indicated that Icahn's contentious relationship with Lionsgate and unresolved suits against the studio were leading them to favor a Spyglass takeover rather than a merger with Lionsgate.
After clashing for much of the past year — with Icahn calling for the ouster of Lionsgate's leadership and issuing round upon round of proxy offers — the two sides appeared to have achieved something close to detente in recent weeks. The adversaries seemed to unite over Lionsgate's 11th-hour merger offer, with Icahn actively working to kill the Spyglass plan.
Without mentioning Lionsgate's suit, Carl Icahn announced Thursday afternoon that he was extending his tender offer to the studio's shareholders until Nov. 12. This moves the deadline for Lionsgate stakeholders to accept the investor's $7.50 a share bid by nearly two weeks.
The billionaire investor has continued hedging his bets throughout the process. Last week he extended his latest tender offer for Lionsgate shares from Oct. 29 to Nov. 1, so the deadline would fall after the Spyglass vote.
As the suit points out, Icahn has been using the time before the Spyglass vote to solicit notes from MGM bondholders — issuing three separate offers over the last two weeks. He now has over $500 million of MGM's nearly $4 billion debt.
“Recent developments have revealed that Icahn was playing a double game,” the Lionsgate suit reads. “While publicly denouncing a merger with MGM as foolish and MGM itself as a dinosaur with a decaying library, Icahn was buying up MGM’s privately traded debt.”
In its filing, Lionsgate is seeking damages and asking the court to rescind the purchases of all shares in the company made by the Icahn Group after the investor made his first proxy offer in March of this year. It also asks for a halt to any further purchases of Lionsgate stock by Icahn until the Securities and Exchange Commission can investigate the studio's charges.
Lionsgate declined to comment, and a representative for Icahn did not immediately respond to TheWrap's request for comment.
Icahn is involved in his own lawsuit against the studio. In suits in both New York and Canada, the investor is trying to overturn a debt-to-equity transaction last summer that reduced his stake in Lionsgate from 38 percent to 33.5 percent.