Time Warner Inc. said late Friday that it reached an settlement with corporate raider Carl Icahn, agreeing to several concessions, including boosting its share buyback to $20 billion over the next two years in return for Icahn pledging not to put forth a competing slate of board members.
The compromise appeared to give Icahn much of what he was looking for, save the actual breakup of the company.
Icahn, who launched his proxy battle to gain control of Time Warner in August, had called for the media giant to boost its share-buyback program to $20 billion and to split the company into four separate entities.
Icahn unveiled his plan to restructure Time Warner Feb. 7 in a 343-page report written by adviser Lazard Ltd. Called the “Lazard Report,” the tome also criticized what it called Time Warner’s bloated corporate overhead.
At the time, Icahn said he would propose a slate of directors for nomination at Time Warner’s annual shareholders’ meeting in May. On Thursday night, according to reports in TheWall Street Journal and TheNew York Times, that slate had been whittled to five possible board members, including former media executive Frank Biondi, whom Icahn had tapped to become chairman of Time Warner if his proxy battle was successful.
In a press release issued Friday at 5:27 p.m. (EST), Time Warner said it had agreed to boost its share-repurchase program from $12.5 billion to $20 billion, stating that it would repurchase $15 billion of its shares in 2006 with the rest coming in 2007.
Also, Time Warner’s nominating and governance committee will recommend the appointment of two new independent directors to the board, and it will seek the advice and recommendations of Icahn and other board members in the process.
In addition, Time Warner said it has begun a comprehensive review of costs at each of its operating divisions and the corporate parent with the objective of better aligning costs with the long-term needs of the business. That review resulted in at least $500 million in cost reductions reflected in its current operating plan for 2006. The company said it will intensify those efforts with the objective of achieving similar cost reductions in 2007. Time Warner also said it will continue to review the Lazard Report and will continue its dialogue with Icahn Partners concerning the recommendations in the report.
“Management's view continues to be that a different capital and corporate structure may be appropriate for Time Warner Cable in the future so long as it provides strategic flexibility with the company's content businesses,” Time Warner said in a prepared statement.
Icahn appeared pleased with the compromise and praised Time Warner chairman and CEO Richard Parsons, the executive who was the target of most of Icahn’s criticism in the past.
“By agreeing to implement the critical corporate reforms we have supported for several months, Dick Parsons is making great strides toward enhancing shareholder value,” Icahn said in the statement. “He has also agreed to work with us to identify other initiatives we believe will unlock further value in the company.”
Icahn concluded, “I am pleased by the many initiatives Dick Parsons has agreed to undertake and, as a result, I do not intend to nominate directors this year. However, I remain committed to the tenets of the Lazard Report and hope to be able to convince Dick, in our future meetings, to accept a number of its recommendations.”
Parsons responded, in a prepared statement of his own, “We are very pleased to have reached an understanding with Mr. Icahn. We appreciate his role as a significant shareholder, as well as his constructive suggestions. As we've said, our board and management are committed to building value for all of our shareholders.”