DealBook: Icahn Ends His Battle With Lions Gate

Chip East/Bloomberg NewsCarl C. Icahn is selling his entire stake in Lions Gate.

With his sights set on Clorox, the activist investor Carl C. Icahn is ending his long-running battle over control of Lions Gate Entertainment.

Lions Gate said Tuesday afternoon that Mr. Icahn had agreed to sell off his entire stake in the movie studio. The two parties also agreed to end all litigation between them, the company said in a statement.

Mr. Icahn first sought to buy all of Lions Gate in March 2010, after the company rebuffed his proposal to increase his stake to nearly 30 percent. Since then, Mr. Icahn and Lions Gate have continued to skirmish, with him making several revised bids and conducting and losing a proxy fight to put his five nominees on the company’s board in December.

Mr. Icahn pulled his last bid, of $7.50 a share, ahead of a December shareholder meeting. He had previously lost a court battle to prevent a Lions Gate director, Mark Rachesky, from exchanging debt for equity in a move that diluted Mr. Icahn’s stake to 33 percent from 38 percent.

In its statement, Lions Gate said Mr. Icahn and his son, Brett, had agreed to sell their stake of 44.2 million shares in the company at $7 a share, which it said was approximately the same as their cost basis in buying the stock.

Shares of Lions Gate closed down 3 cents on Tuesday at $7.52, but they later fell to $7.08 in after-hours trading after the company announced the agreement with Mr. Icahn.

Under the terms of the agreement, a Lions Gate company is buying about 11 million shares, while MHR Fund Management, which is controlled by Mr. Rachesky, is buying another 11 million shares. Lions Gate said it would designate one or more parties to buy up to 22.1 million remaining shares.

“We believe that this accretive and antidilutive transaction is in the best interests of all Lions Gate shareholders, and it allows the company to continue to focus on the execution of its long-term business plan,” Jon Feltheimer, Lions Gate’s chief executive, said in the statement.

As of late, Mr. Icahn has been preoccupied with his effort to either take over Clorox or force the company to sell itself in an auction. Mr. Icahn is seeking to replace the entire Clorox board in order to conduct the auction and said Tuesday that he would agree to buy the company for $78 a share if the auction did not produce at least that price.

Lions Gate, in its statement, quoted Mr. Icahn as saying, “As some have noted, my own ’slate’ is pretty full at the time, and I therefore determined that it is a good time to exit.”

Mr. Icahn has not yet responded to a call for further comment.

Perella Weinberg Partners served as outside financial adviser to the Lions Gate board, and Wachtell, Lipton, Rosen Katz and Heenan Blaikie served as legal counsel.

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