Carl C. Icahn

Carl C. Icahn


one of the most feared "corporate raiders" of the 1980s and 1990s, Carl Icahn helped to define an era of United States economic and cultural history that was characterized by the notion of unparalleled acquisition. Yet whether successful or not, Icahn's numerous takeover attempts always proved profitable as he moved from target to target.
Education of a Corporate Raider
Icahn was born into a comfortable middle-class family in Queens, New York on February 16, 1936; his father was a lawyer and a cantor, his mother a schoolteacher. Following his graduation from Princeton University in 1957 with a B.A. in philosophy Icahn briefly attended medical school at New York University, but decided to switch to a career in finance. In 1960 he hired on with the Dreyfus Corporation in New York City and served an apprenticeship as a broker until 1963. That year he moved over to Tessel, Patrick & Co. (also in New York) where he worked as an options manager. In 1964 Icahn left Tessel, Patrick for Gruntal & Co. In 1968 he struck out on his own forming Icahn & Co., of which he was the chairman and president.
By 1976 Icahn was already on the takeover path. That year he and customers of Icahn & Co. managed to acquire 25 percent of the stock of the Highland Capital Corporation. However the takeover was averted when Highland's chairman, Walter Scheuer, and others bought the shares from Icahn. This was one of the earliest instances where Icahn was involved in the practice of "greenmail," in which he was paid off to leave a company alone. In the 1980s this would become a lucrative method for many corporate raiders.
In 1979 Icahn was involved in a proxy fight with the Tappan Co. As the largest shareholder in Tappan, Icahn sought to have himself installed as the company's director. In a lawsuit Tappan contended Icahn's proxy material contained false statements while a counter suit initiated by Icahn charged Tappan with the same thing regarding its own proxy material. For Icahn, this was all merely a prelude of things to come.
The "Go-Go" '80s
The 1980 election of Ronald Reagan to the presidency along with a Republican majority in the United States Senate (which the party held until 1987) ushered in the so-called "go-go" years of the U.S. economy--an "anything goes" attitude that took its cue from the laissez-faire pro-business policy of the administration. On Wall Street it became the era of the junk bond, the leveraged buyout, the hostile takeover and the corporate raider with men such as Ivan Boesky, T. Boone Pickens, Michael Milliken, and Icahn dominating the financial pages.
By 1981 Icahn was already spinning an intricate financial web. In addition to Icahn & Co. he was chairman of the Bayswater Realty & Capital Corporation, through which he sought to gain control of other companies via the Bayswater Acquisitions Group. In 1982 he led a group of investors who controlled 30 percent of the stock of the Chicago retail chain Marshall Field, and sought to take over the company. The attempt was ultimately thwarted but not before Icahn had forced two increases in the bid offer.
Icahn also went after lesser known but lucrative companies whose stocks were undervalued. In 1982 he acquired 30 percent of the shares of Dan River, Inc., a Virginia textile mill, forcing yet another battle that spilled over into the better part of 1983. It was also in 1983 that the Securities and Exchange Commission (SEC) gave the Bayswater Realty & Capital Corporation a slap on the wrist for its maneuvers in the Marshall Field incident.
In 1984 Icahn completed the successful takeover of ACF Industries, which specialized in rolling stock and shipping. Icahn subsequently became ACF chairman and CEO.
The next company in Icahn's sights was Phillips Petroleum, which had already staved off a takeover attempt by T. Boone Pickens. However, in March 1985 Icahn suddenly decided to drop his takeover bid. At the time it was estimated he made between $50 and $60 million from the attempt. From Phillips Icahn quickly moved to the tire manufacturer Uniroyal. In May 1985 he agreed to a leveraged buyout of his 10 percent of Uniroyal's shares that netted him $16 million plus another $5 million for expenses and cooperation. The era of successful greenmail was now in full swing. Interestingly, Icahn was also paid $41 million by Uniroyal rival, B.F. Goodrich, to avoid a takeover.

TWA Boss


In August 1985 Icahn initiated his boldest acquisition--TWA. He did so initially with union backing as he and his group seemed a far better alternative than the despised Frank Lorenzo, head of Texas Air which was also bidding on the airline. Icahn acquired 52 percent of TWA's stock and became chairman of its board of directors and company CEO (in 1986). With TWA in his shopping cart, and following a little greenmail speculation with Ivan Boesky regarding the media company Gulf and Western, Icahn next went after media conglomerate Viacom. However this attempted 1986 takeover proved to be neither successful nor immediately profitable for him. By late 1986 the bloom was off the Wall Street rose as the SEC began investigating some of the practices of the arbitragers. In November 1986 Icahn himself was under investigation for his TWA acquisition.
While fellow corporate raiders experienced stiff penalties for their business dealings (Boesky eventually pled guilty and Milliken went to jail), Icahn was cleared by the SEC for his TWA actions and in 1988 purchased another 23 percent of the company's shares. He wasn't through yet with TWA. In September 1988 he won approval from a majority of the company's independent shareholders to take the company private. By this time, however, he had fallen out with the union that had initially supported his acquisition if TWA.
Icahn was also the largest shareholder in Texaco, with 17.3 percent of the company's stock. As was his style he was not a passive shareholder, and at times his involvement with Texaco grew acrimonious. However in June 1989 Icahn suddenly sold his stock for $2.07 billion- -the most expensive block trade in Wall Street history. Icahn's profit, including dividends, was estimated to be more than $800 million. Meanwhile TWA, after two years of profit, suddenly nose dived causing the St. Louis business community, where the airline is headquartered, to worry. As for Icahn, he was after a new target: USXCorp, formerly known as United States Steel.
He never did acquire USX and in 1992 TWA filed for bankruptcy, greatly tarnishing Icahn's image. However, he managed to pull off an exit deal that allowed him to purchase blocks of discounted TWA tickets which he then sold through his Internet company, Lowestfare.com.
The Fight for RJR Nabisco
If anything the 1990s, under President Clinton and a Republican-controlled Congress, were more go-go than the 1980s had been. Between 1995 and 2000 Icahn, initially with Bennett LeBow, engaged in four proxy fights to take over RJR Nabisco and force it to split into two companies, which most analysts believed would be worth billions of dollars to investors. Though unsuccessful Icahn eventually made $600 million for his trouble. Eventually RJR and Nabisco did divide into two companies, but not before tobacco litigation had seriously affected the deal.
It was in the midst of this deal that Icahn suffered one of his biggest setbacks. In June 1997 he gained control of the board of directors of Marvel Comics. Marvel had declared bankruptcy in 1996 and Icahn's goal was to put the company back on its feet. However Marvel's banks and other creditors were opposed to his plan and defeated it.
After ending his relationship with RJR Nabisco, Icahn set his sights on retailer J.C.Penney, the Sands hotel and casino in Atlantic City, and General Motors. He caused a stir in late 2000 when it was revealed he had been purchasing GM stock, but as of early 2001 Icahn had made no move against the company.
Icahn also purchased a thoroughbred breeding operation, Foxfield, that has had 17 stakes winners through the 2000 racing season. He is founder of the Carl C. Icahn Foundation and the Carl C. Icahn Program for the Prevention of Child Abuse.