Carl Icahn made his fortune as a corporate raider by buying large stakes and manipulating the targeted company's decisions to increase its shareholder value. On August 7, 2018, Icahn sent an open letter to shareholders of Cigna Corp. (CI) stating that he opposes Cigna's plan to buy Express Scripts Holding Comp. (ESRX) for $54 billion. Icahn is invested in Cigna and believes that the company is "dramatically overpaying" for Express scripts.
As of August 7, 2018, the activist investor's net worth was estimated by Forbes at close to $19.8 billion. This is his story.
Charles Icahn spun through a degree in philosophy at Princeton and three years of medical school before he turned to Wall Street and became a broker and options manager for two different companies. In 1968, Icahn established his own brokerage firm, named Icahn & Co, a holding company that dabbled in options trading and risk, or merger, arbitrage.
Corporate raiding, huge in the 1980s, tagged a certain notoriety. Raiders bought companies by acquiring large stakes in their corporations, achieved out-sized control, and used their shareholder rights to drastically manipulate the company's executive and leadership decisions. Raiders became hugely rich by increasing the value share of these companies through their interference. Icahn rationalized his raiding by saying it profited ordinary stockholders. Sometimes, he merged raiding with greenmailing, where he threatened to take over companies such as Marshall Field and Phillips Petroleum. These firms repurchased their shares at a premium to remove the threat. In 1985, Icahn bought Transworld Airlines (TWA) at a profit of $469 million and, as chairman, turned the firm around from bankruptcy.
By the mid-1980s and through the 1990s, Icahn had amassed controlling positions in various companies that included Nabisco, Texaco, Blockbuster, USX, Marvel Comics, Revlon, Fairmont Hotels, Time Warner, Herbalife, Netflix and Motorola. Each time, the billionaire sought to acquire, break up and/or sell off parts of the company. In 1991, Icahn sold TWA’s prized London routes to American Airlines for $445 million and forged an agreement with TWA, where Icahn could purchase any ticket through St. Louis for 55 cents on the dollar and resell at a discount. He plunged TWA into debt.
In 2004, Icahn successfully engaged in a hostile battle with Mylan Laboratories to acquire a large portion of its stocks. By 2007, the corporate raider owned swathes of companies that included American Railcar Industries, XO Communications, Philip Services, ACF Industries and Icahn Enterprises, formerly known as American Real Estate Partners. The latter is a diversified holding company that invests in various industries. As major shareholder of these companies and one who, therefore, has a dominant say, Icahn has, often, attempted to controversially influence their decisions to increase shareholder value. In 2008, Icahn sold his casino shares in Nevada for a profit of $1 billion. In that same year, he launched The Icahn Report, which promotes his views on markets, stocks and politics. He also acquired 61 million shares in Talisman Energy and renovated the faltering company. In 2014, the billionaire held a 9.4% stake in Family Dollar, which he sold off later that year for a $200 million profit.
(See also: Ackman and Icahn Battle Over Herbalife (HLF))
The Bottom Line
Carl Icahn made his fortune through gaining controlling positions in companies and either forcing them to buy back their stocks at premium prices or manipulating company decisions to increase shareholder value. During the course of his life, Icahn actively impacted the leadership and management of many of his acquisitions. He forced differences in staff, compelled companies to change their rules, forced them to break up and drove some companies into debt. He rebuilt others. Forbes ranked Icahn as the 27th richest man in the United States last year and the 73rd richest in the world in 2018 .