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A Noisy Icahn May Just Want Out

18 Apr, 2005 By: Kurt Indvik

Billionaire investor Carl Icahn is making things very messy for Blockbuster, Inc., leadership and CEO John Antioco. But maybe this is just his way of getting attention and, perhaps, forcing some sort of quick, and profitable, exit for the maverick corporate raider. He has a history of doing just that.

Today, Blockbuster, Inc. CEO John Antioco felt obliged to send shareholders a letter defending himself against Blockbuster's largest shareholder, (Icahn holds 9.7 percent of Blockbuster). You can find the letter on the Blockbuster.com web site.

Icahn, you will recall, began launching a series of public tongue lashings against Antioco and Blockbuster leadership in the wake of Big Blue's failure to acquire Hollywood Entertainment. In letters filed with the Securities Exchange Commission, Icahn castigated Antioco for failing in his bid to acquire the No. 2 rival chain, as well as decrying Antioco's fast-moving retail strategies “spending spree” to counter a flat rental market. Icahn also took issue with the CEO's recent compensation plan, which he termed “unconscionable.” Icahn called for the issuance of more than $300 million in dividends to shareholders, as well as a postponement of the May 11 shareholders meeting. Soon after, he placed himself and two others up for consideration to fill three Board of Director seats at Blockbuster, which come up for election at that May 11 meeting.

I think some industry analysts are right in assuming Icahn is now looking for a way out of his recent unsuccessful flurry of investment in Blockbuster in trying to force a merger with Hollywood.

His call for additional dividends for shareholders, and his threat of taking seats on the board, may be a signal that he doesn't want to wait long. Recently, Icahn reportedly pulled a similar maneuver on energy company Kerr-McGee (NYSE:KMG) when a shareholders group he spearheaded threatened a proxy battle for board seats at the company's May 10 annual meeting. To avoid the messy situation, Kerr-McGee OK'd a tender offer to buy back up to $4 billion of its common stock and drop a lawsuit it had filed against Icahn and his group.

Could Icahn be hoping to force some sort of similar consideration at Blockbuster? Certainly Antioco and the current board would probably like to see this very powerful and noisy shareholder exit the building and not return. We'll have to see if they have any creative ways of helping to send Icahn happily on his way.



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