Icahn plus SWF = Time Warner cable division sale

A public activist effort that Carl Icahn began in 2005 and one that involved a sovereign wealth fund finally is coming to fruition.

That year Icahn began publicly pressing Time Warner Inc. chairman Richard Parsons to split up the media giant. On Wednesday, April 30, Time Warner Chief Executive Jeffrey L. Bewkes said the media giant would complete the spin off of Time Warner Cable, a divestiture Icahn had called for three years earlier.

In 2006, Icahn reluctantly backed down from his proposed proxy contest to press for a cable spin off and stock buyback. At the time he had the support of a number of activists including Jana Partners, SAC Capital Advisors LLC, and Franklin Mutual Advisers LLC. But they cumulatively had roughly a 3% stake in the company, not enough to move the institutional investors who backed Parsons.

A little known fact about Icahn’s efforts to break up Time Warner: He cooperated with a sovereign wealth fund in Dubai to press Time Warner to a sale.

According to a Feb 16, 2006 Schedule 13D filed by Istithmar PJSC, a Dubai based sovereign fund, its subsidiary, Istithmar Media Investments, which bought a 2.39% Time Warner stake, entered into a relationship with Icahn:

“In connection with [Istithmar Media Investments] acquisition of the Participation Notes and possible future investments in the Common Stock, [Istithmar] have retained Icahn Institutional Services LLC, an entity wholly owned by Mr. Carl Icahn, to serve as the investment advisor to [Istithmar Media Investments] with respect to [Istithmar Media Investments] economic exposure to shares of common stock through the participation notes and possible other investments in common stock.”

Istithmar PJSC is a Dubai-based firm that is owned by Dubai World, also the parent company of DP World, the Dubai owned company that sought unsuccessfully to acquire operations at six U.S. Ports. Lawmakers on Capitol Hill changed the law governing foreign acquisitions of U.S. assets after a U.S. government panel initially approved DP World's plans to acquire the six U.S. port operations. DP World backed down amid the resulting political uproar and agreed to sell its operations here to a U.S. entity.

Icahn’s Istithmar agreement was terminated shortly after it was formed, but it showed how in less politically charged days, a combination between an activist and a sovereign fund to press for changes at a U.S. company was not unthinkable. That kind of combination would raise the ire of lawmakers in Washington if it were to happen in today’s climate. -- Ron Orol