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Lions Gate's top shareholder to take 'active' role

Mark Rachesky, who has a 20% stake in the studio, says he backs management, now in a battle with Carl Icahn.

March 19, 2009|Claudia Eller

It looks as if Mark Rachesky, the biggest shareholder in Lions Gate Entertainment Corp., wants to be in the picture.

Just as the company is girding for a potential proxy battle with corporate raider Carl Icahn, Rachesky has changed his status to "active" from "passive" investor and says he may seek a board seat.

Rachesky, who worked as an investment strategist for Icahn from 1990 to '96, appears to be signaling that he backs Lions Gate management -- at least for now -- and is not aligned with his former employer as some have speculated.

In a filing with the Securities and Exchange Commission on Wednesday, Rachesky said he was "principally supportive of Lions Gate management and their publicly stated strategies." He noted that "there are no contracts, arrangements, understandings or relationships" between his investment group and "any other person, including any other securityholder."

Rachesky owns almost 20% of Lions Gate. Icahn owns about 14.5%.

Rachesky, 49, who earned medical and MBA degrees at Stanford and lives in New York, holds his stake in Lions Gate through his New York-based MHR Fund Management. MHR invests in "distressed and deeply undervalued middle-market companies," according to Rachesky's bio on Loral Space & Communications, a satellite company on which he serves as a non-executive chairman.

Rachesky's apparent show of support is in contrast to Icahn, who has blasted the company for what he has called its "excessive" overhead and for its recent $255-million acquisition of the TV Guide Network and TVGuide.com, which he proclaimed "borders on recklessness."

Lions Gate, Hollywood's largest movie and TV studio not owned by a media giant, produces the Tyler Perry "Madea" films and the cable shows "Mad Men" and "Weeds." The Canadian company runs its studio operations out of Santa Monica.

Adam Friedman, a spokesman for Rachesky, said he had no comment.

Lions Gate spokesman Peter Wilkes also declined to comment.

Rachesky said in the filing that he had preliminary talks with Lions Gate about adding a nominee to its 12-member board. He also said he may in the future discuss with the company "matters that may facilitate implementation of MHR's investment strategies and objectives."

Icahn is threatening to launch a proxy fight over Lions Gate after negotiations to gain several board seats broke down over, among other things, the studio's refusal to grant him assurances that a standstill agreement would also be applied to other shareholders seeking board seats.

In recent days, Icahn made an offer to buy up to $325 million of Lions Gate public debt, which if successful and converted to equity, would double his stake.

This week, Lions Gate's defense team, which includes several blue-chip firms with long pedigrees in hostile takeover battles, began to take shape. The studio has hired the firm Wachtell, Lipton, Rosen & Katz, investment banker Morgan Stanley, the corporate public relations outfit Joele Frank, Wilkinson Brimmer Katcher and the proxy solicitation firm Mackenzie Partners.

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claudia.eller@latimes.com

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