Icahn Girds for Proxy Fight

Updated from 2:25 p.m.

Carl Icahn has hired Lazard to wage a proxy battle with Time Warner (TWX).

The news comes as Icahn, the corporate raider turned shareholder activist, and his hedge fund friends have moved to pressure Time Warner managers to bolster the media giant's flagging stock. Icahn's group, which also includes Franklin Mutual Advisers, Jana Partners and S.A.C. Capital, holds 135 million Time Warner shares.

Icahn said Lazard will advise on a slate of friendly directors to be submitted at Time Warner's next annual shareholder meeting.

"Bruce Wasserstein and his team will help us in the election of a slate of directors to replace a majority of the existing Time Warner directors with a view to maximizing shareholder value," Icahn said. "We have brought in Lazard to complete an in-depth study of Time Warner and how shareholder value can be enhanced. It is our contention that it is only through a very meaningful and deep restructuring and share buy-back program that all shareholders will be able to realize the true value of Time Warner."

Icahn has blasted Time Warner for its poor stock market performance, saying only a complete spinoff of the company's cable unit and a $20 billion stock buyback will fit the bill. Time Warner initially clung to plans for a $5 billion buyback but later increased that to $12.5 billion.

The company said once again Tuesday that it would stay the course charted out by CEO Dick Parsons.

"Our board of directors and management are confident that we are taking the right steps to deliver substantial value and a highly competitive return to all of our shareholders," Time Warner said in a statement. "Our businesses are performing well and are all leaders in their sectors. We're committed to returning capital to shareholders while maintaining to capacity to grow our businesses and during the past year we initiated a $12.5 billion stock repurchase program and cash dividend. We look forward to continuing strong performance in 2006."

Icahn said Tuesday that Lazard will do an in-depth strategic analysis of Time Warner's businesses and operations. "The study will focus on strategic initiatives to unlock the value of Time Warner which may include a streamlining of its corporate structure, reconfiguration of its assets, potential sale of selected businesses, adoption of a more appropriate capital structure and commencement of a significant share repurchase," he said. Lazard's Wasserstein helpfully noted that "Lazard is available to meet with Time Warner management, members of its board of directors and shareholders to review value-maximizing alternatives."

On Tuesday, Time Warner shares fell 17 cents to $17.92.

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