MUMBAI: Investor Carl C. Icahn and Time Warner Inc announced that they have reached an agreement regarding specific actions the company will take to improve its capital, corporate and cost structures.
Icahn said that he will drop his bid to seek control of the company and Time Warner will do some of the things the dissident shareholder has recommended. These actions are key to achieving the Icahn Group's long-stated goal of creating value for all shareholders and have proved again that shareholder activism can be extremely effective.
The agreement calls for Icahn not to contest the company's slate of directors at its shareholders meeting in May. In return, Time Warner will increase its share repurchase program from $12.5 billion to $20 billion, matching a figure proposed in a report Icahn released last week calling for a major restructuring of the media giant.
Time Warner's actions include the following:
* Time Warner will increase its existing share repurchase program from $12.5 billion to $20 billion. The company will commit to maintaining an accelerated pace of repurchases that enables it to repurchase a total of $15 billion by year end 2006. The remaining $5 billion will be purchased during 2007
* Time Warner will implement a $1 billion company-wide cost-cutting program
* Management confirmed that a different capital and corporate structure for Time Warner Cable may be appropriate. Management committed to continue to discuss this with the Icahn Group
* Time Warner will work with the Icahn Group in reviewing the other initiatives proposed in the Lazard Report
* Time Warner will appoint two new independent members to its Board of Directors and will consult with the Icahn Group in this process
Furthermore, Time Warner has taken several other significant steps to enhance long term value. These include beginning initial strategic initiatives at AOL, the divestiture of Warner Books and the merger of the WB network with the UPN network.
As head of an investors' group that owns more than 3 percent of Time Warner, Icahn has sought to reorganize the company under new management. Mr. Icahn said,"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."
Icahn's retreat is a victory for Parsons, who has maintained that Time Warner is on the right path. After the Lazard report was released, Parsons sent a letter to shareholders asserting that the company was delivering value to investors.
Time Warner said yesterday that a different capital and corporate structure may be appropriate for Time Warner Cable. It also said it would continue to review the Lazard report and consult with Icahn on its proposals.
Though his initiative came up short, Icahn has no intention of keeping his advice to himself. "I remain committed to the tenets of the Lazard report and hope to be able to convince Dick [Parsons], in our future meetings, to accept a number of its recommendations," Icahn said in his statement.
The agreement yesterday gives Icahn a face-saving departure from his high-profile battle with the company. "We are very pleased to have reached an understanding with Mr. Icahn," Time Warner's chairman and chief executive Richard D. Parsons, said in a written statement. "We appreciate his role as a significant shareholder as well as his constructive recommendations."
