“Walking around with our head in the sand”
Carl Celian Icahn celebrated his 72nd birthday on 16 February. In the three months since, he has cowed the board of Motorola, announced that if Blockbuster (in which he is the largest shareholder) does not acquire Circuit City, he will do so himself, and finally mounted a proxy fight against the Yahoo! board to force the company into the arms of Microsoft.
Icahn is said to have been one of the models for Gordon Gekko, a ruthless corporate raider played by Michael Douglas in the 1987 film Wall Street. More obvious models were arbitageur Ivan Boesky and junk bond king Michael Milken, both of whom were convicted of finance related crimes.
Hollywood, which as we all know is concerned with loftier things than money, did much to demonise the so-called “decade of greed,” which closed with Boesky and Milkin scapegoated for shaking up the cosy old boys’ clubs of corporate America. The establishment couldn’t lay a glove on Icahn, though.
Icahn’s view is that management in the tech sector has become just as fat and lazy as it was in the companies he targeted a generation ago: RJR Nabisco, TWA, Phillips Petroleum, Gulf + Western and Paramount Pictures, Uniroyal, US Steel – the list goes on. Shareholders generally agree with him.
In an interview on the CBS news programme 60 Minutes last March, Icahn said that the US was losing its edge because corporations are bloated with bureaucracies and rampant waste. He summed it up in a wonderfully mixed metaphor: “This is a spectre coming, because we can’t compete with Asia. And we still walk around with our head in the sand.”
The Icahn lift
The “Ichan lift” is what happens to share prices when Icahn takes a position in a company. He doesn’t win them all – his plan to break up Time Warner into four companies failed to attract shareholder support two years ago – but he normally walks away with a healthy profit.
Some terms used regularly in the 1980’s are becoming familiar again during the Yahoo! proxy fight. “Black hats” are those attempting a hostile takeover and “white knights” are alternative M&A candidates recommended by beleaguered boards to rescue them from black hats.
“Greenmail” is inducement a board may give a raider to go away, while “golden parachutes” are generous compensation deals that boards vote themselves to cushion being sacked after a takeover. Lastly, “poison pills” are deals made to deter a successful takeover by creating problems for any incoming management team.
“I make money. Nothing wrong with that. That’s what I want to do. That’s what I’m here to do. That’s what I enjoy,” Icahn told CBS’s Lesley Stahl. “I’m still doing the same thing. I go in, buy a lot of stock in an undervalued company. It helps the other shareholders a great deal, but I’m not putting myself in a cloak and saying, ‘Oh, shareholders, I’m doing a great job for you.’”
“You tell me you’re a shareholder activist,” said Stahl. “I don’t say – the name is the same,” replied Icahn. “An activist is the same as a raider. You call it whatever you want – a rose by any other name.”
