Corporate raider Carl Icahn said Monday that he has teamed up with three other hedge funds in accumulating a $2.2 billion stake in Time Warner Inc., and he called for the media giant to divest its cable business and pledge to buy back as much as $20 billion of its own stock.
In a press release Monday, Icahn said Icahn Partners, Icahn Partners Master Fund, Franklin Mutual Advisors Inc., JANA Partners LLC and SAC Capital Advisors LLC have accumulated about 120 million shares of Time Warner stock (2.6% of total shares outstanding), worth $2.2 billion on the open market.
In the statement, Icahn said he has spoken with Time Warner chairman and CEO Dick Parsons, and the two have agreed to meet later this week to discuss the group’s concerns.
Icahn added in the statement that although Time Warner has done “a commendable job” managing its businesses, it isn’t moving fast enough.
According to the statement, the group believes a separation of the cable business from the content business and a $20 billion share buyback would eliminate the discount inherent in Time Warner stock.
Time Warner already plans to spin off its cable business after it completes its merger with Adelphia Communications Corp. in the first quarter of 2006. However, the company plans to retain an 85% interest in the cable assets, with 15% being sold to the public. Icahn and his group apparently want a larger public float.
Time Warner also authorized a two-year, $5 billion share-repurchase program Aug. 3, which the group apparently believes is inadequate.
In the statement, Icahn said the group has agreed not to sell Time Warner shares before February 2007 or the next annual meeting of Time Warner shareholders, whichever comes first, without Icahn’s consent. The group also said it is talking with other large shareholders of Time Warner.
Time Warner stock was up 17 cents each to $18.41 per share in early trading Monday.