Can Icahn Do It One More Time?
The famed corporate raider is pressing Time Warner for change
On a July day in 1999, Carl Icahn sat down with William Beslow over lunch to hear one final plea to end the divorce battle that had waged for nearly six years.
Beslow, one of the lawyers representing Icahn's first wife, Liba, says Icahn was likely to prevail in court later that day. But Beslow was asking Icahn to look beyond that cold calculation. He wanted the well-known and feared corporate raider to see his opponent in a new frame, that of his wife of nearly two decades and the mother of his two children.
Icahn took a deep breath, thought about it for a moment, then agreed to settle. "He didn't have to, but in the end, he formed an enlightened view that this was the one negotiation in his life not driven completely by business, and he made an exception," recalls Beslow. "He said it was the first time he had changed his mind about anything."
And possibly the last. Icahn, 69, has been called many things during his 40-plus years trolling the waters of Wall Street in search of blood and treasure. Irresolute is not one of them. Icahn has grown immensely wealthy--around $7.8 billion--by being right the first time and by not allowing the niggling tug of empathy to enter into the equation. Corporations that thought they could ignore his wishes, reason with him, or wait out his assaults have generally been gobbled up, partitioned out, or forced to pay a hefty premium to get Icahn to go away.
The list of companies that have bowed to his will, or paid dearly, includes Tappan Co., Marshall Field, Dan River, ACF Industries, Gulf & Western, USX Corp., TWA, Pennzoil, Texaco, RJR Nabisco / Nabisco Group Holdings, Marvel Entertainment, XO Communications, Blockbuster, and Kerr-McGee.
In the cross hairs. Now the man whose sharklike prowess defined the go-go '80s era of junk-debt-financed leveraged buyouts, of "white knights," "black hats," and "poison pills," has a new target--media and cable conglomerate Time Warner--and a new way to finance his attack--billions of dollars locked up in hedge funds he either controls or has enlisted in the war. Asked why he picked Time Warner to flex his muscle, Icahn says simply: "It is very undervalued, and the risk-reward ratio is greatly in our favor."
Icahn and his allies control about 120 million shares, or 2.6 percent, of Time Warner, through purchases of common stock and option contracts that are being converted into stock. He says management has been too timid in restoring the company's tarnished glory. Icahn proposes that the company separate its cable business from its media businesses and immediately buy back at least $20 billion of its stock. Otherwise, Icahn says, he will continue to add to his position, appeal to other shareholders, and lead a proxy fight to install some new representation on Time Warner's board next May.
So far, Time Warner's chairman and CEO, Dick Parsons, hasn't blinked. Instead, when Icahn delivered news of the assault, Parsons invited Icahn over for a chat, then told attendees at the Goldman Sachs investor conference last week that the company was considering Icahn's proposals but believed its cable business--the second largest in the country--"is still a strategically important asset for us." Although he says the company is open to a larger stock buyback, Parsons adds that he is a "big bull" on the cable business and doesn't think it is the right time "to cast it off."
advertisement
