Copyright 2005 Gannett Co. Inc.


August 16, 2005, Tuesday, CHASE EDITION

By David Lieberman

From Lexis Nexis

NEW YORK -- Carl Icahn, who became a billionaire by shaking up undervalued companies, went public Monday with plans to rock Time Warner.

He issued a press release calling on the entertainment giant to unload its cable systems and buy back $20 billion worth of stock, thereby increasing its value to him and other shareholders. Icahn wants to rally investors frustrated by the drop in Time Warner's market value. At $18.50 on Monday, it's down about 5 percent in 2005. It had fallen 15 percent last month before word of Icahn's campaign got out.

Time Warner "has not moved quickly enough, and it has not proposed measures which would enhance values" to where they should be, Icahn says in his press release.

Two of his funds, Icahn Partners and Icahn Partners Master Fund, and allies Franklin Mutual Advisors, Jana Partners and S.A.C. Capital Advisors, plan to more than double their Time Warner holdings.

The funds already own more than 120 million Time Warner shares, about 2.6 percent of the total. Each agreed to buy an additional $500 million worth of stock.

The group also pledged to support Icahn if he wants to offer candidates for the Time Warner board.

CEO Richard Parsons agreed to meet with Icahn on Wednesday.

"We would of course speak with any interested shareholders who have relevant thoughts or perspectives," the company said in a statement.

But several money managers doubt Parsons will heed Icahn.

Icahn and his allies "don't own a huge amount of Time Warner stock compared to what's outstanding," says Vogel Capital Management's Harold Vogel. "And this isn't a classic Carl Icahn story, where you're dealing with sluggish management, an unknown stock and a situation where asset sales won't result in tax problems. Parsons has gone in the right direction."

What's more, Parsons says cable is key to Time Warner's future. He plans to hold on to 84 percent of the business after the systems are spun off as part of Time Warner and Comcast's joint $17.6 billion planned acquisition of Adelphia.

That deal, which is under federal review and could close early next year, would add 4.3 million basic video subscribers to Time Warner's 10.9 million.