The Old Bulls Part 2: Will Yahoo Be Carl Icahn’s Waterloo?

After a long break, we now return to our survey of the Old Bulls on Wall Street. This time we turn our sights on billionaire, corporate-raiding, shareholder-activist, and philanthropist, Carl Icahn. This enigma-investor is perched high in a paneled office overlooking Central Park. Surrounded by million dollar artwork, the most imposing piece depicts a triumphant Napoleon after one of his victories.

No doubt Icahn has contemplated the end of the French Emperor — dying in exile after a humiliating defeat at Waterloo. The question still remains: will the 72-year old financier be remembered for his daring and glorious exploits on the financial battlefield, or for a humble retirement on Long Island?

Unlike the diminutive Bonaparte, Icahn stands a towering 6 foot 3 inches over sometimes-cowering CEOs. Born in Queens on February 16, 1936, Carl Celian Icahn left the city to study Philosophy at Princeton. After graduation, he went back home to learn medicine. But the allure of Manhattan’s financial district proved too much for the ambitious medical student. He abandoned the promise of a quiet practice in the suburbs for the excitement of high finance in 1961.

In 1968, Icahn borrowed money to buy a seat on the NYSE and formed his own company. Icahn would soon keep his public relations firm busy with hundreds of hours of billing. He amassed capital over the next few years and made connections invaluable on Wall Street. According to Fortune, Wilbur Ross, one of those now-billionaire acquaintances, said of Icahn, “he’s the most competitive person I know, and that’s saying something.” Evidently, his penchant for a fight earned him an aggressive reputation among other Type A’s in his field. Not a small task in this business.

Only a few Wall Street dealmakers have garnered press attention like Icahn. For good or for ill, he’s earned a reputation. To some any press is good press, and to Icahn, it’s a way of life. Back in the 80’s he used his capital to buy up TWA then sold off assets to increase shareholder return. The airline subsequently lost jobs through a painful restructure, hence painting Icahn as a vulture. “Corporate Raider” and other such titles circulated in the financial press.

Then the atmosphere changed. As CEO pay skyrocketed and funny-money options scandals became publicized, Icahn transformed from a financier-pirate to a shareholder-savior. His forays into companies like Motorola, Blockbuster, ImClone, and Time-Warner made him the bane of Chief Executives, but the white-horse knight of stockholders. Oftentimes, his efforts to restructure companies added value to share prices. Icahn would orchestrate buy-backs and other tactics to boost prices. With an impressive multi-billion dollar war chest, he took aim at comfortable CEO’s. Icahn targeted imperial CEO’s who jumped ship with $20 million exit packages while their companies faltered. Icahn appropriately earned a crusader’s status. He often won his battles.

Enter Yahoo. In May, Chief Jerry Yang got the call every CEO hates to get. Carl Icahn was on the phone and he was interested in Yang’s job. Yahoo had just rejected Microsoft’s bid of $33 as their stock fell back to $25. Icahn was not pleased. He had just piled in $1.6 billion of his own capital into Yahoo. So he acted. With the backing of several hedge funds, Icahn vowed to wage a proxy battle against Yang to oust the board clearing the way for Microsoft to purchase Yahoo. After numerous press releases and wrangling back-and-forth, Icahn won a partial victory. This month, he gained 3 seats on the board, but one person won’t be leaving. Jerry Yang.

We’re just a few months into this game. It’s still far from over. Yahoo is now trading near $21, much lower than the $33 Microsoft agreed to pay for the most popular site on the internet. The question worth pondering now is this: Did Icahn overplay his hand as champion of the shareholder with a more nimble Yahoo OR is he lying low to fight another day? Earning 3 seats on the board is no mean task. But will this foot in the door be enough for Microsoft to buy their search company? Time will tell if Icahn will get his way. Will he will earn back his buy price, or chalk up defeat as a virtual Waterloo? Don’t count this old bull out just yet.

He’s the most competitive person billionaire Wilbur Ross knows.