It had all the ingredients of a Hollywood thriller: a battle for control of a glamorous movie studio, a powerful billionaire, secret e-mails, and courtroom drama.
But the script for Carl Icahn's fight for seats on the board of Vancouver-based Lions Gate Entertainment Corp. - which has ended, for now, with his failed takeover bid this week - also reads as a cautionary tale for Canadian companies.
The recent frenzy of proxy fights in Canada, a trend boosted in the economic downturn, faded a bit over the past year, according to Riyaz Lalani, chief operating office of Kingsdale Shareholder Services Inc. He said only 12 battles were waged this year, down from 40 in 2009, although 2010's final tally may move a little higher before the month is out.
Still, lawyers who wage these fights say increasing shareholder activism in Canada - by both activist investors and formerly passive players such as mutual funds - is here to stay.
While Mr. Icahn would not rule out a sequel, the Lions Gate saga appeared to end, for the time being, on Tuesday, as the studio announced that its shareholders had elected the company's slate of directors to the board, rejecting Mr. Icahn's five candidates.
On Monday, Mr. Icahn let the deadline pass on his $7.50-a-share takeover bid for the studio, which is behind TV's Mad Men and the 2009 Oscar-winning Precious: Based on the Novel Push by Sapphire.
The surrender came after a 10-month fight and an 11th-hour court ruling in New York that upheld a controversial debt-equity swap with Lions Gate board member Mark Rachesky. The July transaction, which Mr. Icahn derided as a "sweetheart" deal, diluted Mr. Icahn's holdings.
In a statement on Tuesday, Mr. Icahn accused Lions Gate of having "subverted" shareholder democracy by allowing Mr. Rachesky to vote with the shares he obtained in the July swap. Without this move, Mr. Icahn said, he would have won his proxy fight. He also pledged to continue his case against the company in New York Supreme Court and to pursue legal action in Canada, where his unsuccessful challenge of the debt transaction in a B.C. court is under appeal.
The other high-profile Canadian proxy fight making headlines involves Maple Leaf Foods Inc. Its largest shareholder, the McCain family, is embroiled in a proxy battle with an activist hedge fund, West Face Capital Inc., which opposes Maple Leaf's expansion plans.
Long a staple of corporate America, proxy battles have been more common in smaller publicly traded Canadian companies in recent years as investors in a slow economy were looking for other ways to squeeze value out of their assets, says Craig Ferris of Lawson Lundell LLP in Vancouver.
"When people didn't like the way companies were being run, they used to just sell," Mr. Ferris said. "Now they're not. Now they're trying to foist change on management."
Even if unsuccessful, full-on proxy fights are a costly distraction for management and a public-relations problem. They can also end up in court, as the Lions Gate fight did. In B.C. Supreme Court, Mr. Icahn's lawyers argued unsuccessfully that Lions Gate's directors were wrong to orchestrate the debt-equity swap that diluted the company's shares.
That put reams of material about Lions Gate in court documents and in the public domain, including e-mails and other electronic messages from Lions Gate's directors discussing how to fend off Mr. Icahn, who has long complained that the studio was overspending and being mismanaged.
"We will win the proxy fight and dilute the [expletive]out of [Icahn in]the mean time," wrote Lions Gate Entertainment Corp. vice-chairman Michael Burns in an e-mail, singled out in the court documents.
More proxy fights may also cast an unfavorable light on the Byzantine and often unreliable process that governs how shareholders actually exercise their votes, said Carol Hansell, a partner with Davies Ward Phillips & Vineberg.
Ms. Hansell, the co-author of a paper on the system's flaws, also points out that activist investors are interested in more than just votes on directors. Shareholders now have "say on pay" votes for executive paycheques, stock-option plans and shareholder-rights plans or "poison pills."
"There does appear to be evidence that there is more of that U.S.-style [proxy fight]activity going on up here now," Ms. Hansell said. "Which will mean that the shareholder votes will matter more and more."