Icahn Ends His Battle With Time Warner

Dissident shareholder Carl C. Icahn on Friday ended his floundering, six-month bid for control of Time Warner Inc. in exchange for a promise that the world’s biggest media company would buy back additional stock and more aggressively cut costs.

The company also agreed to add two new independent directors.

Time Warner Chief Executive Richard Parsons said the company was pleased to have ended its fight with Icahn.

“We appreciate his role as a significant shareholder as well as his constructive suggestions,” Parsons said in a statement. “As we’ve said, our board and management are committed to building value for all of our shareholders.”

Icahn had been seeking to seize control of Time Warner’s board, promising that if he succeeded, he would boost the value of the company by splitting it up. Time Warner is the parent of such companies as America Online, Warner Bros., Time Inc., HBO and CNN.

But Icahn’s efforts failed to gain traction, with fewer than 6% of its shareholders backing him. Investors called the settlement a vote of confidence in the New York company’s current direction.

“The settlement is a far cry from anything Icahn had proposed,” said Lawrence Haverty, a portfolio manager at Gabelli Global Multimedia Trust, a large Time Warner shareholder. “It helps that there wasn’t anything of significance to fix.”

Haverty praised Parsons for his grace under fire.

“He kept the faith and stuck to his principles,” Haverty said. “Now, management can go back and run the company, which they were pretty good at last year.”

Icahn declared victory despite his failure to achieve his most ambitious goals.

“By agreeing to implement the critical corporate reforms we have supported for several months, Dick Parsons is making great strides toward enhancing shareholder value,” Icahn said in a statement.

Icahn hoped to rally investors by blaming Parsons for Time Warner’s anemic stock price. The New York-born investor, who has amassed an $8-billion fortune by buying stakes in underperforming companies and agitating for change, had argued that breaking Time Warner into four pieces would boost its shares by 50%.

Time Warner’s stock fell 19 cents Friday to $17.78.

Word leaked out Thursday that the two sides were nearing a deal.

Some analysts credited Icahn’s campaign with helping to accelerate changes at Time Warner that otherwise could have taken years.

Time Warner recently agreed to sell its book division and to merge its money-losing broadcast network, the WB, with rival UPN. Under its truce with Icahn, Time Warner agreed to a $1-billion cost-cutting program. The company already is halfway to the goal, having identified at least $500 million in savings for 2006.

In November, Time Warner more than doubled its share repurchase program to $12.5 billion, partly in response to pressure from Icahn. Now, Time Warner is boosting that target to $20 billion, the level suggested by the billionaire.

In his statement, Icahn hinted that Time Warner would consider spinning off a larger stake of its cable unit than previously planned.

Icahn has been pushing for a complete spinoff. The company, which had planned to sell only 15%, has not made a promise to Icahn regarding the cable unit.

The company also made no commitment to fill its independent director seats from among the five candidates Icahn had been prepared to nominate to the board this week, including former Viacom Inc. Chief Executive Frank Biondi.

Time Warner could fill two seats that will be vacant in May with independent candidates to maintain its current size of 14 directors.

One seat was held by an insider -- Steve Case, the co-founder of AOL, which acquired Time Warner in 2000 -- until he resigned last year.