TWA

"The first prospective buyer, Resorts International, put forward a weak bid of $22 a share for a merger, 60 percent of which would be in cash, the balance in debentures. In addition, Resorts simultaneously proposed an alternative plan known as a front loaded tender offer. As popular shareholders move, in some cases stampede them, into the raider’s camp for fear of winding up in the back end of the deal. Under this scenario, Resorts would pay $24 for 60 percent of the stock and a $19 debenture for the balance of the shares. The idea amounted to a poorly camouflaged strategy to box Icahn into a corner. In this case, Resorts would attempt to use the two-tiered takeover strategy to coerce Icahn into accepting its $22 bid. Central to this, Resorts knew that as an owner of more than 10 percent of TWA’s stock, Icahn had a “section 16(b)” problem, which meant that if he sold his shares of TWA within six months of buying them, any profit would revert to the company. This would leave Icahn unable to benefit from Resorts’ front-loaded price. In this context, Resorts was prepared to warn Icahn that if he fought their bid to acquire TWA, they would proceed with the front-loaded tender, forcing Icahn to take the back-end debentures. But if he did not oppose them, Resorts would switch to the one-step merger with an equal price for all the shareholders. As part of its strategy, Resorts planned to create an artificial deadline, giving Icahn an hour to decide which way he would go. As a seasoned M&A negotiator, Freund knew the Resorts attempt to stymie Icahn would fail. Presented with an ultimatum in which he is told to choose between evil A or lesser evil B, Icahn moves into intellectual overdrive, expanding the range of options. In this way, he turns the tables on his adversaries, who find themselves facing a more ominous threat than they hurled at the raider. “We felt that Carl would have said ‘no’ on principle,” Freund said, referring to the Resorts ultimatum. “He would challenge it in the courts and buy in the market underneath the tender, presumably sweeping the streets to get 51 percent. Then he would provide the TWA shareholders with a lower-than-$18 back end.”"

"Kingsley’s office is a reminder that while he might have made more of a name for himself and more money on Wall Street if he had left Icahn’s shadow, at Icahn and Company he has been free to be—himself. Stacks of the Financial Times, waiting to be clipped, climb halfway to the ceiling on one side of the room; the window behind Kingsley’s desk is nearly obscured by mountains of 10Ks, annual reports, prospectuses; and Kingsley himself is barely discernible behind the cascading piles of papers that rise from his desk. “Mount Everest,” remarked a secretary as she tossed a letter onto the top. From beneath his desk, on his visitor’s side, papers spill. And there, too, rest unpacked cartons from the peregrinations of Icahn and Company over the past two decades—one from 42 Broadway, one from 25 Broadway. Out of this strange, unsightly chaos has come what Kingsley says with some pride is the “overwhelming majority” of Icahn’s targets. He selects, then he proposes, debates, sometimes is rejected by Icahn. But they have been together for twenty years, and he has a good sense of what will persuade. When Kingsley was arguing for USX, where chairman David Roderick and the steelworkers’ union had been at each others’ throats, he said, “You know, Carl, you could do again with the unions what you did in TWA.” And he is more than Icahn’s analyst. Once Icahn is in the midst of a deal, Kingsley is his constant sounding board, really his co-strategist, and they often attend negotiating sessions together."

"Icahn, of course, is no one’s fool. In an apparently unprecedented arrangement—and the terms were to be kept secret—Paine Webber placed $ 1 million in escrow, to be forfeited if they were unable to do the deal on the agreed-upon terms. The way the deal was structured, the $ 750 million would enable Icahn to buy out all the shareholders and also take out his investment of about $ 300 million in TWA stock. In addition to getting all his money out, he planned to take out TWA’s computerized reservation system, PARS. It would be given to the Icahn Group as a dividend, and Icahn planned to lease PARS back to TWA for ten years for an amount that would have given Icahn an annual profit of $ 25 million."

"Kingsley’s office is a reminder that while he might have made more of a name for himself and more money on Wall Street if he had left Icahn’s shadow, at Icahn and Company he has been free to be—himself. Stacks of the Financial Times, waiting to be clipped, climb halfway to the ceiling on one side of the room; the window behind Kingsley’s desk is nearly obscured by mountains of 10Ks, annual reports, prospectuses; and Kingsley himself is barely discernible behind the cascading piles of papers that rise from his desk. “Mount Everest,” remarked a secretary as she tossed a letter onto the top. From beneath his desk, on his visitor’s side, papers spill. And there, too, rest unpacked cartons from the peregrinations of Icahn and Company over the past two decades—one from 42 Broadway, one from 25 Broadway. Out of this strange, unsightly chaos has come what Kingsley says with some pride is the “overwhelming majority” of Icahn’s targets. He selects, then he proposes, debates, sometimes is rejected by Icahn. But they have been together for twenty years, and he has a good sense of what will persuade. When Kingsley was arguing for USX, where chairman David Roderick and the steelworkers’ union had been at each others’ throats, he said, “You know, Carl, you could do again with the unions what you did in TWA.” And he is more than Icahn’s analyst. Once Icahn is in the midst of a deal, Kingsley is his constant sounding board, really his co-strategist, and they often attend negotiating sessions together."

"Icahn, of course, is no one’s fool. In an apparently unprecedented arrangement—and the terms were to be kept secret—Paine Webber placed $1 million in escrow, to be forfeited if they were unable to do the deal on the agreed-upon terms. The way the deal was structured, the $750 million would enable Icahn to buy out all the shareholders and also take out his investment of about $300 million in TWA stock. In addition to getting all his money out, he planned to take out TWA’s computerized reservation system, PARS. It would be given to the Icahn Group as a dividend, and Icahn planned to lease PARS back to TWA for ten years for an amount that would have given Icahn an annual profit of $25 million."