Time Warner-Icahn Reach Settlement; No Contest on Board

The fight has ended: Activist shareholder Carl Icahn and Time Warner have reached a settlement, under which Icahn Partners will not contest the company’s slate of directors at the 2006 annual meeting.

The company has agreed to:

– Increase its existing share repurchase program and extend the program’s ending date. It expects it will purchase approximately $15 billion of its common stock by the end of 2006, and the remainder $5 billion in 2007.

– It will recommend the election or appointment of two new independent directors to the board. The company will seek the advice and recommendations of its major shareholders, including Icahn Partners, in this process.

– It wil do a comprehensive review of costs at each of its operating divisions and at its corporate parent with the objective of “better aligning its costs with the long term needs of the business”. It hopes to achieve a cost reduction of $1 billion over 2007.

– The company will continue to review and will continue its dialogue with Icahn Partners regarding the recommendations in the report.

WSJ: The move to back down marks a rare loss of face for Icahn, who turned 70 Thursday. Icahn softened his position amid signs that the effort to take control of the board was losing steam. A number of major investors told him that while they shared his view that Time Warner needed to do more to improve its stock price, they didn’t believe his break-up plan was the solution.

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