Icahn Fires Up TW Battle

Oct 17, 2005  •  Post A Comment

The war of words between billionaire financier Carl Icahn and Time Warner Chairman Richard Parsons over the direction of the media giant heated up last week after Mr. Icahn fired off a missive to Time Warner shareholders in a bid to rally support for change, and Mr. Parsons once again rebuffed Mr. Icahn’s suggestions.

In the letter, which was addressed to Time Warner shareholders, Mr. Icahn blasted Time Warner’s board on several scores, ranging from the ill-fated merger with America Online to the construction of the company’s new corporate headquarters in New York.

Mr. Parsons, meanwhile, continued to dismiss Mr. Icahn’s calls for change, arguing his suggestions won’t move Time Warner’s stock price-a key driver behind Mr. Icahn’s efforts.

The letter is the latest move in an overall strategy by Mr. Icahn to put pressure on Mr. Parsons and the rest of the Time Warner management to take measures Mr. Icahn feels will jump-start the company’s stock price, which hasn’t traded above $20 a share for the past two years.

Among other things, Mr. Icahn wants the ability to nominate someone to serve on the Time Warner board. He is also pushing for the company to increase the size of its stock repurchase program to $20 billion from $5 billion and for the company to completely spin off its cable unit, instead of the current proposal to sell 16 percent of the cable unit to the public.

Heavy Criticism

And to put weight behind what he’s advocating, Mr. Icahn has formed an investment consortium that has begun snapping up Time Warner shares, and he is inviting other large investors to join forces with the Icahn team. Analysts have said Mr. Icahn might have difficulty amassing a big enough chunk of Time Warner stock, given the media giant’s shares are widely held and its market capitalization is more than $82 billion.

In the letter Mr. Icahn criticized Time Warner’s purchase of America Online, noting that many of the directors who authorized the purchase of the troubled online company remain on the board today.

He also charged that the company sold its music operation and its 50 percent stake in cable network Comedy Central at what he called “fire sale prices.” He noted that Warner Music Group was sold to an investor group for $2.6 billion and a year later was sold in an initial public offering totaling $4.7 billion. Comedy Central was sold to Viacom for $1.5 billion, though two years later investment bank Morgan Stanley valued the cable network at more than $4.5 billion.

In addition, Mr. Icahn questioned management’s decision to spend $800 million on what he called a “lavish” corporate headquarters in New York.