ANALYSIS: Carl Icahn, king of the corporate raiders

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Activist shareholder: Carl Icahn

The man behind the Xerox bid to buy HP, and the same man who blocked the Fujifilm bid to buy Fuji Xerox and then effectively sacked the Xerox CEO and board, is 83-year-old billionaire Carl Icahn – one of the kings of corporate raiders.

These days corporate raiders prefer to be known as activist shareholders, but the modus operandi is little changed since they first came to prominence in the 1980s financial markets: buy a stake in a business, where possible by leveraging the business itself; get yourself or your nominee on the board; then carve up the business and sell off the profitable parts, while the loss-making parts – and the debt – are left behind.

In the 1980s, with Ronald Reagan and Margaret Thatcher leading the global charge to deregulate the finance sector, in the belief that the markets should make their own decisions, Icahn was one of the pioneers of the type, and one of a handful of names that would make boardrooms quake at their mention, and still does.

Icahn gained first gained his high profile with his raid on TWA Trans World Airlines, at the time one of the world's biggest aviation companies. He bought 20 per cent of the business, made himself chairman, and three years later took it private, which delivered a decent windfall to himself of a not inconsiderable US$469m, but the airline didn't do quite so well, it got loaded with a $540m debt. Icahn then sold off the most profitable routes, to London, for $445m. TWA was bankrupt a year later.

In a desparate move to rid itself of Icahn TWA agreed that he could buy its tickets for 55c in the dollar, in what was known as the Karabu deal. He was not allowed fo sell them though travel agents, but no-one at TWA appeared to have heard of the internet, Icahn set up a website which was competing direct with TWA offering its own seats at a super discount rate. TWA was sold to American Airlines and finally bit the dust in 2001. American Airlines estimates Karabu cost TWA US$100m a year.

He was later involved in a gigantic battle with the eBay founder, and one of his highest profile plays was with tech giant Apple, which he bought into in 2013-14, acquiring stock worth US$3.6bn and selling 32 months later, making himself a tidy $2bn profit for his outlay, mainly, claim critics, through pushing the Apple board and CEO Tim Cook to engage in an aggresive share buyback strategy. Between 2012 and 2016 Apple Inc bought US$116.6bn of its own shares, which saw the market jack up the price of the shares. It also paid out US$36bn in dividends, calling them capital returns, which was somewhat of a misnomer as the dividends did not go to the people who injected capital, but to shareholders like Icahn.

Critics of the corporate raiders / activist investors like Icahn say the reality of their plays is that the value of a company is extracted from the people who actually produce it, and goes into the hands of the billionaire class, who care little for the staff, seeing them as just numbers on the spreadsheet, and have no interest in the long term viability of the business, while proponents say they keep boards honest and focused, and deliver the best returns for shareholders.

As the biggest investor in Xerox, Icahn was the man who stopped the board's plan to sell Fuji Xerox to Fujifilm and then saw off CEO Jeff Jacobson, replacing him with current incumbent John Vinsentin - who was paid a nice US$23m for his first year's work. Icahn then instigated the plan to buy HP – a company nine times the size of Xerox, and in which he is also a major shareholder. He owns 11 per cent of Xerox and a little over four per cent of HP.

His plans do not always work out, but after more than half a century playing high stakes billion dollar financial poker he sure knows how to turn the screws.

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