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TIME WARNER COMBATANTS EDGING TOWARD MIDDLE GROUND

Negotiations for a Cease-fire Between Carl Icahn and Board

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NEW YORK (AdAge.com) -- Months of sturm and drang, corporate theatrics and takeover threats at Time Warner have climaxed in ... a whimper.
Photo: AP
Time Warner chairman-CEO Richard D. Parsons
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Billionaire financier Carl C. Icahn and Time Warner executives were negotiating last night to produce a cease-fire between the warring camps, according to a person in the Icahn camp. No such agreement has been locked in stone, but the efforts to reach an accommodation represent a stunning turnabout in a confrontation that until now has been marked by brinksmanship from both sides.

A win for CEO Parsons?
Details of any potential agreement were unclear and far from final this morning, but by most lights they would represent a win for Richard D. Parsons, chairman-CEO of Time Warner.

The agreement could include a more modest bid by Mr. Icahn to gain influence on the Time Warner board. Rather than nominate a slate of directors large enough to take control of the company, Mr. Icahn may propose as few as five candidates. On a 14-seat Time Warner board, their bloc would not be enough to force through many Icahn demands, most notably breaking the company into four pieces.

Mr. Icahn had recently found a modicum of support from some corners, including Pali Research analyst Richard Greenfield, who wrote that he would support the Icahn camp unless Time Warner adopted some of his ideas for aggressive changes.

But today, Merrill Lynch analyst Jessica Reif Cohen said in a research note that she was not shocked by the development. “The outcome does not strike us as particularly surprising, as we did not anticipate significant support for a change in administration,” Ms. Cohen wrote. “The apparently rapid resolution demonstrates the depth of the disconnect between Mr. Icahn and other investors with regard to management performance and the potential for valuation upside in the event TWX [Time Warner's stock symbol] were to be split apart, in our opinion.”

Investors to this point seem to have either concluded that Mr. Icahn would fail or that his success would not benefit the company much in any case. Its stock price has hovered around $18 since the Icahn-funded Lazard Report came out Feb. 7. (The report from investment bank Lazard Freres & Co. detailed Mr. Icahns's dismemberment plans for Time Warner.)

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