Icahn, Parsons Call Time Warner Undervalued

A heavily anticipated meeting leads two hard-hitters to agree a long-stagnant stock is cheap.
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Time Warner

(TWX)

chief Dick Parsons and restive shareholder Carl Icahn may not see eye to eye on much, but they agree that the media giant's shares are undervalued.

The two met Wednesday afternoon to discuss the company's future, in the wake of

Icahn's demands that Time Warner separate its media and cable businesses and quadruple the scope of its stock buyback plan.

Neither side offered details of what was discussed, but everyone agreed it's worthwhile to keep the lines of communication open.

"Mr. Parsons and Mr. Icahn had a frank and open exchange of views," Time Warner said. "Dick Parsons impressed upon Mr. Icahn that the Board and management are committed to moving as aggressively as is appropriate on the current course to create and deliver long-term value for all of our shareholders."

Icahn's statement spoke of a "lively" exchange of ideas, concluding, "At the end of the meeting, we both observed that we had, at the very least, one thing in common: we both believed Time Warner was meaningfully undervalued and that we both wanted very much to rectify this situation. We agreed to communicate again shortly."

Icahn demanded Monday that the company take swift action to boost its stagnant stock. Icahn's group said it will soon own $4 billion worth of the company's stock, a stake that could amount to 5% of the company.

The "separation of the cable business from the content businesses combined with the immediate repurchase of at least $20 billion of common shares would eliminate the discount between TWX's share price and the inherent value of its unique assets," Icahn said Monday. "The investors intend to discuss these views with other large holders of TWX common stock."

Parsons is widely recognized as a sound leader who has navigated Time Warner through some rocky seas. Time Warner set plans this month to buy back $5 billion worth of stock, but Icahn believes it's not enough. Likewise, the company has said that it will spin off 16% of its cable unit when the Adelphia acquisition closes in early 2006, while Icahn would like a wholesale split.

Media disassembly is in vogue these days with many large competitors taking action with varying assets.

Time Warner shares were down 9 cents on Thursday to $18.21.