Carl Icahn’s offices carry a distinct museum quality. Three decades of scalps, resulting from some of the most famous hostile takeovers, proxy fights and board assaults in American financial history, cover every cranny of his wood-lined corridors. There are model airplanes from TWA—the takeover that cemented his name among major league dealmakers—and toy trains from ACF Industries, which has served as his cash machine for decades. Lucite tombstones recount conquests involving many of the great companies of the 20th century, from MGM to Motorola, Texaco to Nabisco.
Yet Icahn’s backward-looking perch, near the top of Manhattan’s old-school GM Building, has never been more relevant, as forty something billionaires like Michael Dell and Bill Ackman are learning to their chagrin. In the last 15 months, the 77-year-old has taken positions in and then launched campaigns against 14 companies, a burst that has made him, at an age when he would have long been expected to fade away, the most disruptive individual in business, with a hand in almost every major corporate story in America.
One moment he’s launching a full-blown bid to snatch Dell from its eponymous founder. The next, he’s needling deepwater driller Transocean to pay out a gusher of a dividend. When there’s good news at Netflix, money managers shake their heads at Icahn’s timely investment. And if you stand in his way? His fingerprints were all over the resignation of Chesapeake Energy’s notorious Aubrey McClendon. Meanwhile, his live CNBC brawl with Ackman, who’s on the other side of his position in controversial vitamin company Herbalife, lit up trading floors around the world.
All of which leaves Icahn decidedly … relaxed. His face gives it away: He now sports a scholarly white beard, a byproduct of a recent jaunt to Miami. And his demeanour backs it up: Icahn sold his 177-foot yacht because he got bored spending time on it; the investor has discovered that, for him, happiness means pursuing his activism actively.
“What else am I going to do?” Icahn asks rhetorically. “Sit at boring dinner parties?” He says this with a wave of the hand, leaning back in his chair. He’s a few days away from making an unsolicited bid for Dell, recently valued at $25 billion, offering to put up a $5 billion equity commitment funded almost completely out of his own pocket. Yet he’s as nonchalant as if he were mulling whether to help a buddy open a Dairy Queen franchise. Clad in a blue blazer with gold buttons, he calmly sips on a straw that delivers Coke from a crystal cup. “We’re at the top our game,” he says. “There’s never been a better time to do what we do.”
To be frank, though, what he does has changed. He used to make runs at companies via junk bonds and other tools of leverage. Then he figured out how to use other people’s money via a hedge fund structure. Now, though, it’s all Carl—with a net worth that Forbes estimates at $20 billion (which makes him the richest Wall Streeter, edging out George Soros). He doesn’t need anyone’s help or approval anymore. And that now makes him very, very dangerous.
“He loves winning, and he loves money—but it’s just a scorecard to show he’s recognised value and won,” says finance billionaire Leon Black, Icahn’s investment banker at Drexel Burnham Lambert in the 1980s before co-founding private equity giant Apollo Global Management. “He is smart and unrelenting, he doesn’t care what other people think and even though he is not always right, I would never bet against him.”
While Icahn’s re-emergence has taken Wall Street by surprise, it’s actually the result of five years of careful planning. Icahn had spent the 2000s making hundreds of millions of dollars the new-fashioned way: Creating a hedge fund structure, so that he could invest his own money alongside people willing to give him 2.5% of their investment, plus 25% of their profits, for the privilege. By 2007, he was managing as much as $5 billion in outside capital from endowments, pension funds and even a Middle Eastern country. It worked wonderfully until his funds lost more than 35% of their value during the economic meltdown. Suddenly, like most fund managers, he faced disappointed investors and let cash-strapped partners redeem their funds.
Instead of scratching back his assets under management, Icahn cut himself loose from the burden of limited partners entirely. He returned the remaining $1.76 billion of outside capital in his hedge fund in 2011. “I never had a problem with my investors,” says Icahn. “But in the end, there were too many conflicts when you wanted to buy a hundred percent of a company.” Rather than be a fee-earning fund manager, he would reboot as a lone wolf, armed with a jumble of personal investment pools commingled with the funds of his publicly traded vehicle, Icahn Enterprises LP. (The public company, of which he owns over 90%, holds $24 billion in assets, including majority stakes in eight companies, such as auto parts maker Federal-Mogul.)
Over the past four years, Icahn’s investment funds have outperformed the S&P 500 Index, averaging returns of more than 25% a year, a feat few hedge fund managers can claim. He’s off to another good start this year—with his investment funds up 12% through March 13. More impressive, Icahn claims his portfolio has largely been hedged in the last few years—his stock holdings offset by large short positions of the S&P 500 Index. At the same time, Icahn Enterprises has outperformed the US stock market over the same period. As a result, Icahn, who was worth perhaps $9 billion at the bottom of the market, has quickly doubled up.
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