NEW YORK -(Dow Jones)- Lions Gate Entertainment Corp. (LGF) sued activist investor Carl Icahn on Thursday, alleging he publicly opposed a merger between Lions Gate and Metro-Goldwyn-Mayer Inc. earlier this year in order to postpone the tie-up until he could better profit from a potential merger.

The studio, which produces the hit television series "Mad Men," claims Mr. Icahn was playing a "double game"--publicly saying he would oppose the merger, while secretly amassing a large stake in MGM's debt.

"Icahn opposed a merger with MGM not because it was bad for Lions Gate shareholders, but because it was good--so good, in fact, that he wanted to postpone it until he could buy as much of both companies as he could and thus extract for himself as much of the value stemming from the merger as possible."

On Thursday, Mr. Icahn said he has been buying MGM debt outside of two standing offers he has to purchase debt from MGM holders. He already owns at least $480 million of the studio's bank debt.

Mr. Icahn is trying to block a combination of MGM with Spyglass Entertainment. MGM is struggling under $4 billion in debt.

He also has launched a take-over bid of Lions Gate.

In its lawsuit, Lions Gate claims Mr. Icahn also tried to block attempts by Lions Gate to merge with other studios earlier this year by threatening to challenge other transactions and to sue any entity that interfered with his tender offer for the company.

Lions Gate was in advanced negotiations with two unnamed studios in June when Mr. Icahn threatened to block other deals, according to the lawsuit.

"Unwilling to become embroiled in vexatious litigation brought by a plaintiff with bottomless pockets, they both walked away from a deal with Lionsgate at that time," the complaint said.

A Lions Gate spokesman declined comment beyond the complaint.

The lawsuit, filed in U.S. District Court in Manhattan, is seeking that purchases of Lions Gate shares by Icahn until "complete and accurate" disclosures have been made with the SEC and to block future purchases until his company does so.

The complaint also is seeking damages for Icahn's alleged "tortious interference" with other potential tie-ups for Lions Gate.

Mr. Icahn was not immediately available for comment.

-By Chad Bray, Dow Jones Newswires; 212-227-2017; chad.bray@dowjones.com

(END) Dow Jones Newswires

10-28-10 1758ET