Icahn seeks to derail Google as partner of AOL
By Eric Auchard
Dissident shareholder Carl Icahn on Monday labeled as "disastrous" a
new deal set to be unveiled this week between Time Warner Inc.'s
America Online unit and Web search leader Google Inc., as the
billionaire investor argued that AOL could do better. "Not only
stupid, but disasterous and outrageous," he claimed.
Icahn said in a letter to Time Warner's board of directors that the
company appeared to be on the verge of a "disastrous decision"
following reports it is in talks to sell a 5 percent stake of its AOL
Internet unit to Google Inc..
Icahn, whose group has a 3.1 percent stake in Time Warner, said he
feared a Google pact may preclude a merger or other deals with the
likes of eBay Inc., Yahoo Inc. IAC/InterActiveCorp, or Microsoft
"Like all shareholders, I am not opposed to Time Warner entering into
an AOL transaction that creates long-term value," Icahn
wrote. "However, I am deeply concerned that the Time Warner board may
be on the verge of making a disastrous decision concerning an
agreement with Google," he said.
In the past several months, Icahn has blasted Time Warner's every move
as falling short of realizing the company's full value. He has hired
investment bank Lazard Ltd to wage a campaign to replace a majority of
Time Warner's directors.
A Time Warner spokesman declined to comment. "There's nothing new
here, and given that, we're not going to comment," spokeswoman Kathy
A Google spokesman was not immediately available to comment.
Shares of Google, which traded to record intra-day high level of
$446.21, up 3.7 percent on the day, turned tail and fell back on news
of Icahn's opposition to the potential new search and advertising deal
between AOL and Google.
Google shares fell $5.55, or 1.3 percent, to close at $424.60 on
Monday on Nasdaq. Meanwhile, Time Warner shares finished off 5 cents
at $17.95 on the New York Stock Exchange.
Icahn, who has said he is waging an "all-out proxy battle" to force
Time Warner to step up asset sales and streamline, cited a recent
report by Goldman Sachs that argued that Google may not be the best
long-term partner for America Online.
Wall Street analysts debated whether the $1 billion, which sources
said Google was prepared to pay AOL for a 5 percent stake, was a
meaningful calculation of the implied overall value of AOL -- $20
billion -- if it were spun-off.
Some analysts groused that the investment could simply be an expedient
way for Google to keep AOL as a key customer and thwart rival
Microsoft from gaining a foothold in advertising. Citigroup analyst
Mark Mahaney calculated that AOL's business declined to just 1.9
percent of Google's net revenue recently.
Another financial analyst, who declined to be named, said Google may
view the $1 billion stake as a small down payment to avert the loss of
AOL as its biggest single customer and thereby defend its lofty $125
billion market capitalization.
Copyright 2005 Reuters Limited.
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