Time Warner is girding for battle with Carl Icahn as the billionaire corporate raider steps up his offensive against the world’s biggest media-entertainment company.
Icahn, a financier who is one of the wealthiest Americans and has a history of hostile takeover moves, controls only about 2,8% of the shares of Time Warner with his partners.
But in recent weeks he has been arguing that the company is undervalued, poorly managed and in need of a major shake-up that would maximise value for shareholders.
Over the past week, Icahn’s investment group hired Lazard to ”analyse various strategic alternatives” for the company.
”The study will focus on strategic initiatives to unlock the value of Time Warner, which may include a streamlining of its corporate structure, reconfiguration of its assets, potential sale of selected businesses, adoption of a more appropriate capital
structure and commencement of a significant share repurchase,” the Icahn Group said in a statement.
And Icahn said in an interview with CNBC television on Friday that he wants a seat on the Time Warner board, and to boot out chairperson and chief executive Dick Parsons.
The board has ”done the worse of all worse they could do,” Icahn said.
Asked about Parsons, Icahn said, ”We want the right guys at the right positions … Yes, Mr Parsons is one of the members we want to be deseated.”
Icahn, whose wealth is put by Forbes magazine at $5,8-billion, complained earlier this year that Parsons was not moving fast enough ”to realise the inherent value of Time Warner’s well-positioned and unique assets”.
The move by Icahn highlights shareholder discontent with Time Warner, which merged with Internet giant America Online early in 2001 amid much fanfare at the height of the dot-com boom.
But that boom has gone bust and Time Warner’s share price has gone south with it.
But Icahn argued that ”AOL is a jewel, and they did nothing with it.”
AOL has been the subject of much speculation in recent weeks, with some reports hinting at a sale or partnership with a major internet player such as Google or Microsoft.
But Ichan said AOL, still one of the top names in the Internet, has value, and added, ”I’ll hold the board personally responsible if they sell AOL for bad reasons.”
Icahn said the problems with AOL were not the only missteps at the media behemoth, which controls Warner Brothers studios, Time magazine, Turner Broadcasting and CNN, among others.
He said other mistakes includes the sale of Warner Music and a 50% stake in the Comedy Central cable channel, which he said have grown 80% in value since 2003.
The financier said Parsons also erred in failing to bid for Metro-Goldwyn-Mayer studios, and argued that Time Warner’s corporate costs are bloated.
Some reports say Icahn would split up the giant into four separate firms — one each in cable television, internet, publishing and television/film.
Time Warner’s board has expressed confidence in its current strategy.
”Our board of directors and management are confident that we are taking the right steps to deliver sustainable value and a highly competitive return to all of our shareholders,” said a statement issued last month.
”Our businesses are performing well, and are all leaders in their sectors. We are committed to returning capital to shareholders while maintaining the capacity to grow our business … We look forward to continuing strong performance in 2006.”
In its most recent quarter, Time Warner reported an 80% year-over-year jump in profits to $897-million, with revenues up six percent at $10,5 -billion.
A showdown is expected at the company’s annual shareholder meeting in May, where Icahn will be vying for a seat on the board.
One consideration for shareholders is the company’s stock price, which has been hovering at around $18 after trading as high as $70 in 2001.
But Standard and Poor’s analyst Heather Goodchild said the turmoil may be another negative for Time Warner.
”We are concerned about the repercussions of continued shareholder pressure to enhance equity returns,” she said. – Sapa-AFP