Time Warner Investor Works to "Derail" Rumored Google/AOL Deal

Legendary investor, the 24th richest man in America, and a major holder of Time Warner stock, Carl Icahn, is not happy with the rumored AOL deal with Google and according to this News.com story*, is working to “derail” the deal.

From the article:

“Like all shareholders, I am not opposed to Time Warner entering into an AOL transaction that creates long-term value. However, I am deeply concerned that the Time Warner board may be on the verge of making a disastrous decision concerning an agreement with Google if this agreement would make it more difficult in any way or effectively preclude a merger or other type of transaction with companies such as (InterActiveCorp), eBay, Yahoo or Microsoft.” Icahn wrote in an open letter to the Time Warner board of directors.

The full text or Mr. Icahn’s letter is available here.

The letter includes the following paragraph where Icahn questions of Google is the best partner for AOL:

I also question whether Google is the best partner for unlocking the value of the AOL asset. Indeed, a recent Goldman Sachs report concludes, “In contrast to the conventional perspective, we believe that eBay, followed by InterActive Corp, would provide greater incremental benefits to AOL’s option value with fewer conflicts of interest than Yahoo while MSN and Google would provide the least incremental benefits.”

Icahn has been building support for a proxy fight to split AOL off before last Friday’s news.

Icahn’s letter goes on to say:

The real risk for Time Warner shareholders is that a Google joint venture may be short sighted in nature and may preclude any consideration of a broader set of alternatives that would better maximize value and ensure a bright future for AOL.

Once again, I am not opposed to the Board using its business judgment to enter into a transaction with Google or another suitor so long as the transaction does not destroy or impede Time Warner’s flexibility to unlock shareholder value in the near and long term.

We should know more later this week afer the Time Warner Board Meeting.

More coverage of the possible Google/AOL deal is available here.

* Postscript: On Jan. 24, 2006 I noticed that the live version of the News.com story was no longer available. That’s why we are now linking to a cached version.