Crains New York - February 4, 2013 - (Page 4)

IN THE MARKETS Investors and the wrath of Icahn T wo years ago, Carl Icahn decided he was tired of managing other people’s money, so he returned $1.8 billion to his hedge-fund clients and told them to scram. But the legendary investor just can’t seem to keep the crowds away. Shares in Icahn Enterprises, Mr. Icahn’s publicly traded company, have soared by an eye-popping 56% since Christmas. It’s by far the best performance of any financial stock, according to the Bloomberg/Crain’s index of 200 New York-area companies. “This is an investor’s chance to ride on Carl’s bus,” said David Merkel, who invests in Icahn Enterprises’ stock on behalf of clients at his money-management firm, Aleph Investments. In part, the rally reflects how Mr. Icahn’s profile, always high in the markets, is especially elevated after he and hedge-fund foe Bill Ackman engaged in a long and colorful catfight on CNBC last month. But the main reason investors are casting their lot with Mr. Icahn is that for decades he has successfully pestered scores of underperforming companies to shape up or sell out so investors can make hefty profits. With the longdormant corporate-merger scene showing signs of reviving, Mr. Icahn’s cantankerous place is where lots of investors long to be. “In an environment like this, investing with an activist is pretty appealing, and there is no better activist than Icahn,” said Damien Park, managing partner at Hedge Fund Solutions, a firm that tracks activist investors. “You can’t invest directly with him anymore, so the way to go is the indirect route by investing in his company.” Icahn Enterprises is a tiny stock. Even as volume tripled during the When you’re so close to your ocean view room, so close to famous art, and so near a café cubano, you’ll know. No tweet, snapshot or posting will ever be enough. You so have to meet here to get it. MiamiMeetings.com ©Greater Miami Convention & Visitors Bureau – The Official Destination Marketing Organization for Greater Miami and the Beaches. 4 | Crain’s New York Business | February 4, 2013 ACTIVIST ICON: Investors want a piece of Carl Icahn. Shares in publicly traded Icahn Enterprises are up 56% since Christmas. recent run-up, fewer than 60,000 shares changed hands daily. But as a conglomerate it is formidable. The companies it owns, including American Railcar, auto-parts maker FederalMogul and casino operator Tropicana, collectively employ 58,000 people. The real draw, however, is the company’s $2.3 billion parked in Mr. Icahn’s private investment funds, which hold significant positions in hot stocks like Netflix, which has tripled in the past year as Mr. Icahn lobbied for a takeover.Another big holding is Chesapeake Energy, the oil and gas explorer whose CEO resigned last week under pressure from Mr. Icahn after taking out $1 billion in loans from the company. Those kinds of moves have given Mr. Icahn such clout that it’s news any time he discloses a position and the company’s stock price invariably rises.By one conservative count,he’s conducted 109 activist campaigns against 89 companies just since 1994, according to research firm FactSet SharkRepellent, although that figure understates his tenacity since he first made waves as a “corporate raider” in the 1980s. Over his long career,he’s amassed a $15 billion fortune and is notorious for fighting over every last dollar. For example, last year Goldman Sachs and Deutsche Bank sued a company called CVR Energy, alleging Mr. Icahn instructed management to refuse to pay each bank $18.5 million in fees they were owed for analyzing his takeover bid. CVR denied Mr. Icahn issued any such order, but, in any case, after the activist acquired a majority stake last year for $2.6 billion, the company’s stock price doubled. Mr. Icahn is so battle-ready that he’s been known to turn against his partners, such as when he went to war against Warren Lichtenstein, a prominent activist he teamed with in 2006 to shake up tobacco maker Korea Tobacco & Ginseng. That investment generated a 33% return in just 10 months. But in 2009, he sued Mr. Lichtenstein for allegedly trying to take his hedge fund public without 8 newscom by Aaron Elstein giving investors like Mr. Icahn sufficient notice. The matter was settled out of court. Cashing out investors in his hedge fund in March 2011 also left a sour taste with some. In the spring, Mr.Icahn liquidated positions in two biotechnology stocks, Biogen Idec and Regeneron Pharmaceuticals, that combined were worth more than $1 billion, according to a regulatory filing. He didn’t have to share his gains with outsiders because he’d already forced them out of his hedge fund. “The question with investing with Carl is, do you trust him to do what’s right for anyone not named Carl Icahn?” Mr. Merkel said. There’s no question who calls the shots at Icahn Enterprises: Mr. Icahn personally controls 93% of the shares. Most institutional investors don’t bother with the stock. Mr. Icahn, who wouldn’t comment for this article, turns 77 next week and has shown signs in recent years of easing back a bit.In addition to returning his hedge-fund clients’ money, last year he seemed to designate his son Brett, 33, as successor by agreeing to hand him and a partner up to $3 billion over four years to invest. The younger Mr. Icahn has worked at his father’s firm for a decade, and a $300 million investment portfolio that he started comanaging in 2010 returned 96% through last June, according to a regulatory filing. In the past,Mr.Icahn has strongly denied any plans of retiring, and people who know him well say they are certain he will continue at his job until he is physically unable to do so. His foundation, which supports such causes as charter schools in the Bronx that bear his name, has gotten more visible lately. In November, he pledged $150 million to the Mount Sinai School of Medicine, which was renamed in his honor. People who know him say his wife handles most of the charity activities. “It’s not as if he’s got a big life outside of work,” said a person who has worked with Mr. Icahn on activist campaigns. Ⅲ WEEKS THAT COMMODITIES have rallied without interruption, according to Bloomberg News. Such a lengthy rally in the Standard & Poor’s GSCI Spot Index, which tracks the prices of 24 raw materials, hasn’t happened since 1996 and reflects investors’ betting on an improving global economy creating more demand for everything from copper to corn. http://www.MiamiMeetings.com http://www.MiamiMeetings.com

Table of Contents for the Digital Edition of Crains New York - February 4, 2013

THE INSIDER
ALAIR TOWNSEND
IN THE BOROUGHS
IN THE MARKETS
BUSINESS PEOPLE
OPINION
GREG DAVID
DIGITAL NY
SMALL BUSINESS
REPORT: HEALTH CARE
THE LIST
CLASSIFIEDS
REAL ESTATE DEALS
SOURCE LUNCH
OUT AND ABOUT
SNAPS

Crains New York - February 4, 2013