Carl Icahn Raises Stock Holding in Viacom to 17%, Sources Say

Financier Carl C. Icahn bought 1.5 million shares of Viacom International stock Friday, increasing his stake to about 17% of the entertainment company, Wall Street sources said.

The New York investor is widely believed to have purchased the block from Chicago-based JMB Realty executives, who have been holding nearly 2.37 million Viacom shares or 11.6% for the past five months.

Icahn’s aggressive buying will likely cease for now, however, because an investment exceeding 15% typically requires a 20-day review by the Federal Trade Commission, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

In addition, Icahn presumably is not yet willing to trigger an anti-takeover defense adopted recently by Viacom, which would occur if he acquires 20% or more.

If the price that he is paying for Viacom shares is deemed unfair by management and its investment banker, other shareholders would receive special stock that could make an unwelcome takeover prohibitively expensive. A breathing spell might be welcomed by both Icahn and Viacom, as they work out their separate strategies.

Viacom executives, who have indicated a strong desire to remain independent, were said to be in meetings Friday night and were unavailable for comment.

Executives at other entertainment companies speculate that Viacom initially will search for a friendlier investor to buyout Icahn or look for another large acquisition to increase Viacom’s debt, which has climbed to about $900 million with recent purchases.

Several entertainment companies--including Warner Communications and Walt Disney Co.--have expressed willingness to hold friendly talks if Viacom signals for help, sources said.

Most Wall Street traders interviewed Friday expressed the view that Icahn wants to push the company into a merger or have his shares purchased at a profit. Viacom reportedly turned down an Icahn request last week to buy back his holdings when they totaled less than 5%. That rebuff set Icahn off on his buying spree, starting with a purchase of a 1-million-share block from investor Ivan F. Boesky last Monday, according to sources.

Icahn has moved so swiftly that none of his Viacom holdings have been publicly disclosed at the Securities and Exchange Commission. Under federal securities law, an investor must disclose any stake exceeding 5% within 10 calendar days, identifying the source of funds and the purpose, among other things.

Viacom’s management under President Terrence A. Elkes has won considerable respect for its broadcasting and cable TV operations.

“He’s tough, and he’s smart,” one high-level Hollywood executive said Friday of Elkes. But the same executive wagered that Elkes would agree to merge Viacom with another company if a sufficiently attractive offer materializes. “If there were enough money in it, he’d go on and do something else,” the executive said.

29% of Orion

Viacom’s recent investments include the purchase of 29% of Orion Pictures and the pending acquisitions of KMOX-TV in St. Louis ($122.5 million) and MovieLab ($14 million). The company also bought the 50% of Showtime/The Movie Channel Inc. that it didn’t already own.

More than 2.27 million shares of Viacom changed hands Friday, making it the fourth most active issue on the New York Stock Exchange and establishing a 52-week high. The stock closed at $72, up $1.37 1/2.

The 1.5-million-share block traded Friday at $70 per share, indicating a possible profit of about $8 per share for the JMB-led group, which purchased many of its shares at prices ranging from $59.25 to $63. Analysts estimate that Viacom would be worth between $80 and $100 a share if its assets were sold separately.