Lions Gate Films Entertainment Corp. is once again trying to crash the gates at Chatsworth-based Image Entertainment Inc., this time with a lawsuit to force Image's entire board to stand for re-election.
Lions Gate has sought to buy Image since last year. Image fended off the studio's most recent takeover bid in October, in which Lions Gate offered $4 a share in cash, just slightly above Image's trading price at the time.
Image board members said late last year that they are open to a sale, but that previous offers were too low.
John Kirkland, a partner at Greenberg Traurig LLP, Image's outside counsel, said that based on estimates the company had received from various investment brokers, the board would likely consider offers in the $6 to $8 per share range.
"The suit is utterly and completely frivolous," Kirkland said. "Lions Gate is a predator, and at this point they are just desperate."
A Lions Gate spokesman emphasized the company would explore all options to maximize shareholder value.
Lions Gate said in the filing that "Image's current board is not acting in the best interests of Image and its stockholders" for refusing to sell the company.
"In light of Image's stock trading significantly below the price per share offered in 2005 by Lions Gate and for other operational reasons, Lions Gate has lost confidence in the current board's ability and/or desire to maximize stockholder value," the filing said.
Lions Gate owns 19 percent of the DVD and CD distributor's company stock. In the filing Thursday, Lions Gate said it filed a lawsuit in Delaware on Tuesday to force Image's entire board of directors to face re-election for their seats at the company's 2006 annual meeting.
Image, which has which has a library of about 250 CDs and 3,000 DVDs and annual revenue of about $120-million, reincorporated in Delaware in 2005 a move Kirkland said was instrumental in affording Image protection from takeover attempts like Lions Gate's. As part of the reincorporation, Image's six-member board serves staggered three-year terms, with board members up for re-election every two years.
Lions Gate's suit seeks to wipe out the staggered terms and force all six directors to face possible replacement at the annual meeting in June. If successful, the move would allow Lions Gate to field and nominate its own slate of directors.
"Delaware is the gold standard in corporate protection; that's why we went there," Kirkland said. "[A staggered board] is one of the most effective anti-takeover measures there is."
Lions Gate is Image's second-largest stockholder, behind Metromedia Co. founder and chairman John Kluge and partner Stuart Subotnick, who own 28 percent of the common stock.
In its first attempt in September, Lions Gate made an all-stock offer valued at about $91 million, based on Lions Gate's share price at the time.
Image rejected the September bid, which had declined in value to between $68 million and $74 million as Lions Gate's shares dropped, but asked for a revised offer. Lions Gate came back with an $85 million bid, which Image rejected.
Image shares rose 2.9 percent to settle at $3.59 on Thursday; Lions Gate shares fell 1 percent to $9.42.
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