NEW YORK — Carl Icahn took Time Warner to the mat Tuesday with an aggressive litany of the conglom’s perceived missteps, post-AOL.
In Icahn’s estimation, those failings include bungling the acquisition of MGM and selling Warner Music and Comedy Central on the cheap.
“In life and in business, there are two cardinal sins. The first is to act precipitously without thought, and the second is not to act at all,” wrote the corporate raider in an open letter to Time Warner shareholders filed with the Securities and Exchange Commission.
TW’s board and management “already committed the first sin … and we believe they are currently in the process of committing the second,” wrote Icahn, who’s been riding the company since the summer to do something dramatic to boost the stock.
Time Warner defended its track record — slashing debt, stabilizing AOL, settling massive lawsuits hanging over from that deal — and indicated that some announcements are on the way. “We look forward to sharing our next steps with our shareholders in the coming weeks,” it said.
TW is talking with Microsoft about the software giant taking a stake in AOL. The acquisition of Adelphia Communications is pending, and so is the spinoff of 16% of Time Warner Cable — a move Icahn called “akin to inaction.”
Time Warner said its management, led by chairman-CEO Richard Parsons, is open to “constructive ideas from knowledgeable people.”
Parsons and Icahn met once several months ago. It’s been downhill from there. Icahn has partnered with a handful of hedge funds and is hoping to attract more. He bought some stock and said he may try to put up some alternate candidates for election to TW’s board of directors at the next annual meeting — “bringing a new voice for shareholders to the board.”
He reminded investors that 12 of the company’s 15 current directors — seven from Time Warner and five from the AOL side — approved the merger with AOL, including the Netco’s former topper, Steve Case.
Wall Street, however, has mostly sided with Parsons, who’s been a steadying presence following the emotional and financial fallout from the AOL debacle. Time Warner was $30 billion in debt.
And at the time it went down, the $1.2 billion sale of TW’s half of Comedy Central was well received. The sale of Warner Music for $2.6 billion was regarded as something of a coup, given the shaky state of that biz. In any case, TW still owns a chunk of the company and has an option to boost its holding.
WMG’s market cap is now about $2.5 billion.
Time Warner came off awkwardly in its pursuit of MGM, citing fiscal discipline for walking away from the deal, only to put in a higher bid at the 11th hour when it was too late. The Lion went to Sony, Comcast and a group of financial investors. Still, most investors were relieved the deal didn’t go through.
Icahn has a point when he notes Time Warner has promoted its own broadband service, Road Runner, for years, yet never effectively promoted AOL or integrated AOL with this platform. The two are now better integrated, but AOL has lost millions of dial-up subscribers over the past four years.
Icahn, in his letter, called TW’s cost structure bloated, citing fancy digs at Columbus Circle, and said he plans to hire a consultant over the next few weeks “to analyze and compare Time Warner’s costs to its peers … including … perquisites afforded the board and top management.”