(Bloomberg) -- One of the world’s largest pension funds sued Lions Gate Entertainment Corp. to block the movie and television studio from separating from its struggling Starz cable and streaming service via a blank-check merger.
Canada Pension Plan Investment Board, which manages nearly $700 billion, filed a lawsuit Tuesday in New York alleging Lions Gate violated obligations to investors in a $1 billion 2021 note issue in order to pave the way for its profitable studio business to be transferred to a special purpose acquisition company.
According to CPPIB, Lions Gate conspired with a group of “favored noteholders” who were granted advantageous terms in a new issue in exchange for agreeing to amend terms that would have prevented a Starz separation. The pension fund asked the court to invalidate the amendments, block the SPAC deal and force Lions Gate to compensate it for the loss in value of its investment.
A spokesperson for Lions Gate said: “The transactions and amendments are expressly permitted by the underlying agreements in all respects. The litigation is wholly without merit.”
Lions Gate is perhaps best known for the Hunger Games and Twilight film franchises. According to the suit, the billions of dollars in revenue generated by those movies sent the studio’s stock soaring about a decade ago, but it made a “major strategic blunder” in 2016 by acquiring Starz for $4.4 billion.
“Despite the heavy sticker price it paid, Lions Gate has never even come close to realizing the sort of profit it was hoping to get from Starz,” CPPIB said in its suit.
Lions Gate was trading at $8.80, down around 1.5%, on Tuesday afternoon.
The case is CPPIB Credit Investments v. Lions Gate Entertainment, New York Supreme Court, No. 654398.
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