Icahn Positioning to Put Pressure on Time Warner

Aug 10, 2005  •  Post A Comment

Financier Carl Icahn, fresh from orchestrating an investor coup at video retailer Blockbuster that led to a board shakeup, is said to be gearing up to lead a group of shareholders who want to push media giant Time Warner to share more of its cable unit with the public and even explore spinning off its publishing unit.

According to a report in Tuesday’s Wall Street Journal, which cited an unnamed source, Mr. Icahn is also pushing the company to increase the size of its share buyback from the present level of $5 billion.

Exactly how large a shareholder bloc Mr. Icahn has behind him is not clear. Mr. Icahn himself had around a 0.1 percent stake in Time Warner in January, though he has been purchasing an unknown number of shares since then. The report said the shareholders backing him would bring the number of shares involved to less than 5 percent of Time Warner’s outstanding shares. It’s unclear who the other investors are, but the article postulated that they are likely hedge funds.

With the company’s market capitalization at more than $83 billion, Mr. Icahn and his investor group would have to buy $4 billion more in shares, the article said.

Time Warner is planning to spin off its cable unit following the completion of its acquisition of Adelphia Communications, which Time Warner bought with Comcast earlier this year. Time Warner’s current plan is to offer 15 percent of the cable operation to the public, though Mr. Icahn is apparently preparing to push for a larger stake to be shared with Wall Street.

Meanwhile, he apparently is also gearing up to push for Time Warner to consider spinning off its publishing unit, which analysts have long said is undervalued and which doesn’t fit neatly with the company’s media and entertainment properties.

Mr. Icahn appears to not be pushing for the company to spin off its America Online unit, which continues to lose dial-up customers to broadband services from other providers.