M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Thursday, March 13, 2014

Lions Gate - sign of the times?

Lions Gate settled administrative charges brought against it by the SEC in connection with its late run-in with Carl Icahn:

According to the SEC’s order instituting settled administrative proceedings, Lions Gate’s management participated in a set of extraordinary corporate transactions in 2010 that put millions of newly issued company shares in the hands of a management-friendly director.  A purpose of the maneuver was to defeat a hostile tender offer by a large shareholder who had been locked in a battle for control of the company for at least a year.  However, Lions Gate failed to reveal that the move was part of a defensive strategy to solidify incumbent management’s control, instead stating in SEC filings that the transactions were part of a previously announced plan to reduce debt.  In fact, the company had made no such prior announcement.  Lions Gate also represented that the transactions were not “prearranged” with the management-friendly director, and failed to disclose the extent to which it planned and enabled the transactions with the expectation that the director would get the shares.

The settlement (available here) is noteworthy because in addition to paying a $7.5 million fine, Lions Gate admitted wrong-doing.  The SEC has been under pressure for its practice of settling cases without demanding an admission of wrong-doing - the thought being that if firms were required to admit wrong doing as part of any settlement they would resist settlement opportunities.  Well, in this particular case, the SEC was able to secure an admission.  I wonder if this will be the new normal.



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