Icahn, Time Warner: Not Just Fishing Expedition

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So Carl Icahn wants to try to force Time Warner(TWX Quote) to break up, perhaps by spinning off the cable and publishing companies. This kind of effort always offers plenty of intriguing subplots. Today, I want to break down whom Icahn really wants on his side, and then analyze the prospects for this activist effort, which looks like a winner in almost any outcome.

Chasing Big Game

The various articles that have been written have noted that he owns only 0.1% of the company and that he might try to pursue other shareholders, such as Ted Turner. However, this morning The Wall Street Journal reported that Turner is not part of Icahn's group.

First off, Icahn could have zero shares of Time Warner and still be able to throw his weight around (although the fact that he owns $100 million worth of the media giant's stock is certainly further motivation). However, the key in an activist play on a company of Time Warner's heft is not amassing shares but amassing clout and influence with the key players.

I have no doubt that Icahn was pursuing Turner, and maybe Turner really has spurned him by this point. But keep in mind that at this point, according to recent filings, Turner owns only 1.5 million shares after mass-selling them over the past few years.

So why would Icahn bother pursuing Turner, a smaller stakeholder? It all boils down to fly-fishing.

Turner regularly fly-fishes with Gordon Crawford, who runs Capital Management & Research, a huge money management firm. Unlike Turner, Crawford is mostly unknown outside the media investing world, but owns large stakes in just about every media company. He owns 243 million shares of Time Warner and, at a 6.7% stake, is the largest shareholder.

To be sure, Crawford's primary fealty is to the investors of Capital Management, and he will not blindly side with management, no matter how cordial he has been with them. In fact, he has participated in activism in the past, with perhaps his best-known effort being the call he made to Steve Case in 2002, asking him to resign as chairman of the board of the then-called AOL-Time Warner.