Lionsgate Entertainment on Wednesday pitched a merger with the debt-laden Hollywood studio MGM supported by Carl Icahn, even as its lawyers fought a lawsuit in the British Columbia Supreme Court brought by its largest shareholder.

The contrasting overtures underlined how Vancouver-based Lionsgate is attempting to fend off a continuing takeover bid by Icahn at the same time it pacts with the rebel shareholder to take aim at the hobbled studio.

The reason for Icahn’s two-pronged strategy is simple: the billionaire investor has been buying up stock in Lionsgate at the same time he was accumulating debt in a struggling MGM.

“This is a unique, once in a lifetime opportunity to create a dynamic, forward-looking studio that unlocks tremendous potential value for Lionsgate’s shareholders and MGM’s various stakeholders,” Lionsgate CEO Jon Feltheimer and vice chairman Michael Burns said in a joint statement.

Lionsgate and Icahn are in a race to delay a planned October 22 vote by MGM creditors on a rival bid for MGM by Spyglass Entertainment that would involved a prepackaged restructuring plan in U.S. Bankruptcy Court.

Lionsgate first proposed a rival merger with MGM on Monday, and made the bid public in a U.S. regulatory filing on Tuesday.

“A Lionsgate merger with MGM is a natural fit that would bring together two of the most powerful libraries in the world, create significant cost savings, consolidate our mutual global channel operations and generate significant incremental revenue and cash flow,” Feltheimer and Burns continued in their pitch to major MGM creditors.

“It would create a combined entity with enough scale to leverage all of our distribution platforms worldwide,” they added.

The proposed Lionsgate/MGM combination would place the Hollywood studio, best known for its James Bond movies, into the ownership of Lionsgate shareholders and studio creditors.

Also Wednesday, respective lawyers for Lionsgate and Icahn offered justices at the British Columbia Supreme Court dueling versions of a $100 million debt-for-equity swap in July at the center of a lawsuit brought by the activist shareholder.

“No hyperbole can truly capture what was accomplished by the management and directors of Lionsgate in the dead of night on July 20, 2010,” lawyers for Icahn said in a pre-hearing court filing.

Icahn is taking Lionsgate to court for converting around $100 million of debt into common stock as part of a transaction that increased the stake of a rival shareholder, Mark Rachesky, while reducing Icahn’s own holding from 37.9% to 33.5%.

Lawyers for Icahn in the court filing contend the debt exchange blocked the rebel shareholder from carrying through on a threat for a proxy battle at Lionsgate’s upcoming 2010 annual shareholders meeting as part of a wider bid to take control of the Canadian-based mini-studio.

But lawyers for Lionsgate, in their own court filing, called for a dismissal of Icahn’s lawsuit on grounds the debt-for-equity swap aimed to reduce the company’s debt load, which is in the interests of shareholders.

“Icahn himself has urged Lionsgate to reduce its debt,” the company said in its court filing.

The B.C. Supreme Court hearings are schedule to end on Thursday, before an eventual ruling from the provincial justices.