‘80s Corporate Raider Hasn’t Lost His Taste for Takeovers

Carl Icahn is a corporate raider who’s spent the last 20 years being a company’s worst nightmare or a stockholder’s best friend, depending on your view. But this much is true either way: Icahn’s in it for the love of the game.

Icahn got very rich and nearly became a household name in the 1980s as a raider of the first order, making headlines with other financiers such as T. Boone Pickens Jr. as they waged hostile takeovers--or threatened to--of dozens of giant companies and made work a living hell for countless executives.

Yet long after most of Icahn’s peers have faded from the financial scene, and long after Icahn has made more money than most could spend in several lifetimes, Icahn is still roiling the corporate waters at age 64.

“It’s sport for him,” said Lloyd Greif, chief executive of Greif & Co., an investment banking firm in Los Angeles. “Making money is sort of like a byproduct. The real kick for him is the process, the real kick is winning.”

Icahn, whose net worth Forbes magazine estimates at $4.2 billion, is waging war with Nabisco Group Holdings Corp. The company’s sole asset is its majority ownership of Nabisco Holdings Corp., the maker of Ritz crackers, Oreo cookies and other foods.

Having long pushed for Nabisco Group’s sale, Icahn--who already owns 9.5% of the company--offered this week to buy the remaining shares himself for $4.7 billion. Whether Icahn really wants to own Nabisco Group, or merely hopes to flush out another bidder in order to turn a quick, fat profit on his existing shares, remains to be seen. Icahn declined to be interviewed.

But Nabisco Group is just one item on Icahn’s plate.

He’s also becoming a mini-mogul in the gaming industry, having acquired control of or major stakes in several small, struggling hotel-casinos. They include the Stratosphere, Arizona Charlie’s and Sunrise Suites in Las Vegas, and the Sands and the Claridge Hotel in Atlantic City, N.J.

In typical Icahn style, he’s often bought the hotel-casinos’ battered bonds at big discounts, sometimes when the companies are in bankruptcy proceedings. Then he gets the debt converted to stock ownership which, he hopes, will eventually be worth much more than he paid for the bonds. That’s how, for instance, he gained control of the Stratosphere, whose tower stands 1,149 feet above the Las Vegas Strip.

Icahn, through his American Real Estate Partners and other companies, also has interests in other real estate and land development projects, such as office buildings, and companies involved in mining metals and leasing rail cars.

And when it comes to publicly traded companies, Icahn’s actions still move markets. Nabisco Group’s stock has soared 73% in just the month since Icahn’s overtures. Federal-Mogul Corp. stock surged 25% on March 29 after Icahn announced that he’d bought a 5.2% stake in the ailing auto parts maker.

Now the managements of Nabisco Group, Federal-Mogul and the rest get to endure the same troubling decisions that Icahn has forced on so many other companies over the years, including Texaco Inc., Phillips Petroleum Co., Trans World Airlines Inc. and Marvel Entertainment Group, to name just a few.

All found themselves jousting with Icahn’s demands that they be sold, split up or take some other action to boost the price of their stocks. In many cases that ultimately enriched Icahn and other investors. But sometimes the companies kept their independence only by borrowing heavily, which in turn forced them to slash costs and lay off workers.

Indeed, Icahn’s moves more than once have set off alarm bells among a target company’s employees. When he waged a proxy fight against Phillips Petroleum in the mid-1980s, for example, its workers doused proxies in Phillips motor oil and lit a bonfire in protest.

But to many, Icahn’s efforts have been no worse than those of the executives he targeted, who did everything in their power to keep their jobs and their million-dollar salaries even if their companies and stock prices were languishing.

Icahn once termed it the “corporate aristocracy.” He’s always relished the role of being the stockholders’ champion by matching his financial tactics with anti-management tirades.

Take Nabisco Group. Icahn as usual minced no words in blasting the company’s management recently. Noting that Nabisco Group’s stock had suffered “a long, steep decline” after it was spun off from the R.J. Reynolds Tobacco business last June, Icahn said former Nabisco Group Chief Executive Steven Goldstone “received more than $29 million in cash, securities and benefits last year.”

The fight for Nabisco Group, in fact, exemplifies Icahn’s tenacity, brashness and canny ability to find undervalued assets, no matter how dull the business. Icahn doesn’t worry about whether his investments are trendy or sexy, he only cares if they succeed.

Carl Celian Icahn grew up in a middle-class neighborhood in the New York borough of Queens, the son of a schoolteacher mother and a father who was a lawyer, teacher and cantor at the local Jewish synagogue.

Icahn graduated from Princeton University with a philosophy degree in 1957. He tried New York University medical school, but quit after three years. Legend has it he went to Wall Street with $4,000 in poker winnings, but, in any case, he opened the securities brokerage Icahn & Co. in 1968.

He started by merely speculating on takeover situations, or what’s called risk arbitrage. But Icahn, who recently married for the second time, eventually took the active role in pressuring companies and then became the familiar corporate antagonist during the merger-mania days of the 1980s.

But his billions of dollars have come with a few lumps over the years. During the time he financed and then controlled TWA (1985-93), relations between the financier, the airline’s unionized workers and many politicians were extremely contentious. TWA’s operating woes also meant Icahn’s investment went years without earning a dime.

As part of his exit from TWA, Icahn ultimately got the right to buy $600 million of TWA tickets at deep discounts for several years, in exchange for renegotiating about $200 million of debt the airline owed him.

Icahn later created a travel agency, Lowestfare.com, both to peddle the tickets and to take advantage of the Internet shopping craze. Icahn hoped to bolster Lowestfare.com’s position against the likes of rival Priceline.com by taking Lowestfare.com public. But a year after filing plans for its initial stock offering, the sale has yet to occur.