Icahn, others lose Steel Partners challenge

By Joseph A. Giannone

NEW YORK (Reuters) - Activist investor Warren Lichtenstein got court approval on Friday to move forward with his controversial plan to convert hard-hit hedge fund Steel Partners II into a listed investment company.

Investors including corporate raider Carl Icahn, fund manager Michael Price, the J. Paul Getty Trust and several college endowments wanted to stop the fund's conversion and favored an immediate liquidation of the whole fund.

But Delaware Chancery Court Judge William Chandler refused to grant a temporary injunction sought by the group.

"I am unable to conclude plaintiffs will suffer immediate an irreparable harm if the injunction is not granted," Chandler said in a hearing webcast by Courtroom View Network, exclusive provider to Westlaw, which is a unit of Thomson Reuters.

The ruling paves the way for Lichtenstein, who makes concentrated bets on a few companies, to carry out his plan.

On July 15, investors who want to remain with Lichtenstein will receive units of Steel Partners Holdings LP and some cash, plus quarterly distributions for up to two years.

Those who chose to exit will receive a mix of cash and a pro rata share of the portfolio's securities. Steel Partners said on Friday it intends to list the investment company by the end of this year.

Chandler rejected a number of objections raised by the dissident investors who said Lichtenstein was locking up investor cash, issued misleading statements and had essentially begun winding down the partnership. Plaintiffs said fund investors would be better served by a court-ordered liquidation of the entire fund.