Icahn Continues to Pressure Time Warner

This morning a group led by Carl Icahn filed with the SEC an open letter to Time Warner shareholders. The letter is highly critical of Time Warner management:

In life and in business, there are two cardinal sins. The first is to act precipitously without thought, and the second is to not act at all.  Unfortunately, the Board of Directors and top management of Time Warner already committed the first sin by merging with AOL, and we believe they are currently in the process of committing the second; now is not a time to move slowly and suffer the paralysis of inaction, yet we fear based on their recent statements that the current leadership of Time Warner does not recognize the need to take bold action for shareholders.  The Time Warner PR machine would like you to believe that Mr. Parsons and the Time Warner Board have been performing well and taking the necessary steps to deliver value for shareholders, and it appears that many in the press have accepted this storyline.  But after taking a closer look at the years following the merger with AOL, it is clear that there have been a series of significant missteps by the Board and Time Warner's senior management which have resulted in the further destruction of value.  Unless this legacy of poor decision-making is fully recognized and the Board is held accountable, the dismal record of mistakes and inaction will continue to the detriment of shareholders.

The letter then describes the "significant missteps."  At the core of his complaint is the 2000 merger of Time Warner with AOL, which precipitated a stock decline of more than 75 percent of the company's share value.  Twelve of the fifteen current directors (including the CEO Richard D. Parsons) were on the board in 2000 and voted in favor of the merger.  "Why are a majority of the same directors who signed off on the disastrous AOL merger still steering the corporate ship?"  he asks. Click here for the full text of the letter.  Time Warner has penned an official response.   

Today's letter reiterates points made in a position paper filed by the Icahn group last month calling for Time Warner to spin off its cable unit and buy back $20 billion in stock. The group also indicated at that time that it intends to mount a proxy contest to gain one or more board seats at the next Time Warner annual meeting.

Icahn and a coalition of hedge funds hold 43 million shares of Time Warner, 2.8 percent of the outstanding common stock.