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Carl Icahn Gives Up on Takeover Bid, Sells His Lionsgate Stake

The billionaire investor and the studio also agree to drop all outstanding litigation

Carl Icahn's years-long quest to control Lionsgate is over, and this time the controversial corporate raider's pursuit ends in disappointment. 

The studio announced Tuesday that the billionaire investor and his son Brett Icahn agreed to sell up to 44,161,971 shares of Lionsgate common stock, representing virtually all of the Lionsgate shares currently owned by the family.

As part of the sale, Icahn and the studio, who have fought each other in suits in both Canada and the U.S., agreed to dismiss all outstanding litigation between them and release all claims that they may potentially have against each other.

Icahn's decision to divest himself of Lionsgate is somewhat surprising, because he has been buying up additional shares in the company in advance of its Sept. 13 annual meeting in Toronto. 

Also read: Lionsgate: Icahn Group Has a Record of Value Destruction

Although tensions between Icahn and the Lionsgate board had cooled since raider failed in an attempt to stock the board with loyalists, some speculated that the new stock moves might signal the billionaire was ready to stage yet another takeover attempt. 

For Lionsgate, Icahn's decision to end his association will allow the studio to turn the page on a costly and draining proxy fight — one that many analysts maintain depressed the company's stock price and clouded its future. 

"It's very important," Marla Backer, an analyst with Hudson Square Research, told TheWrap. "They are under enormous pressure to create a big new franchise in 'Hunger Games,' and I think the biggest potential risk to their success was Icahn."

Icahn's dispute with Lionsgate stretches back to 2009, when he first tried to shake up the studio board and install son Brett at the company's helm. At various points, throughout the hostilities, he has also agitated to have the studio merge with MGM. 

Icahn will sell his stake for approximately $7.00 a share to the studio, Lionsgate director Mark Rachesky, and a party that the studio will designate over the next 35 days. 

Rachesky will now take Icahn's place as the company's largest shareholder, controlling nearly 40 percent of Lionsgate's stock. 

The $7.00 purchase price was approximately 7 percent below Friday's closing market price of $7.55 and less than the $7.50 tender offer Icahn made last winter. 

There is some irony in Rachesky buying Icahn's stocks. The legal fight between Icahn and the studio has centered on Icahn's efforts to reverse a controversial debt-for-equity swap that reduced his stake from 32 percent to 38 percent, while awarding a larger share in the company to Rachesky.

And the associations don't end there. Rachesky previously worked for Icahn, as an investment advisor before leaving to open his own firm, MHR Fund Management. 

Under the terms of the deal, Rachesky will now control 11,040,493 shares of Lionsgate common stock,  Lionsgate controls 11,040,493 shares of  common stock, and the undesignated investor — or investors — will gain access to 22,080,985 additional shares.

Icahn will retain a small stake in the company, of approximately 1 million shares.