King Icahn
The only full biography; Icahn cooperated then repudiated it.
Summary
Mark Stevens wrote this unauthorised biography of Carl Icahn covering his career from the 1960s through the early 1990s. It traces the arc from options arbitrage at Gruntal, through the risk arbitrage operation Icahn built, to the campaigns against Tappan, Marshall Field, Phillips Petroleum, Texaco and finally the acquisition of TWA.
Stevens sets out the method clearly. Icahn identified companies trading below the value of their assets or below what a buyer would pay, accumulated a position, and then forced a response by threatening a tender offer or a proxy contest. Whether the outcome was a sale of the company, a recapitalisation, or a payment to Icahn to go away, the position was profitable. Stevens documents the greenmail transactions in which target boards bought back Icahn's stake at a premium unavailable to other shareholders, and he is critical of them.
The TWA chapters are the most substantive. Icahn acquired the airline in 1985, took it private in 1988 in a transaction that loaded it with debt and paid himself, sold its London routes, and left it in bankruptcy. Stevens treats this as the point at which the shareholder-value argument became indefensible. The book is hostile, was written without Icahn's cooperation, and stops thirty years before the end of his career, including the Icahn Enterprises period and the later activist campaigns. It remains the fullest account of the formative period.
Key takeaways 7
- Icahn's method was to buy an undervalued position and then create the event that would realise the value, rather than waiting for one.
- Greenmail payments transferred value from remaining shareholders to the raider, which contradicts the shareholder-value justification offered for the activity.
- The threat of a tender offer was worth more than the offer itself, because it forced boards to act without requiring Icahn to fund an acquisition.
- Icahn's early options arbitrage taught him to look for mispriced claims on the same underlying asset, which is the structure of every campaign he ran.
- TWA's dismemberment showed that an activist who gains control faces a different problem from one who forces a sale, and Icahn was better at the second.
- Boards of the period had no defence against a determined accumulator because they had never faced one.
- Stevens argues that the discipline Icahn imposed on complacent managements was real, and that he captured most of the resulting value for himself.
Who should read it
Investors studying activist strategy who want the origin of the modern campaign playbook and a hostile account of what it cost the companies involved.
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