B8| Saturday/Sunday, October 19 - 20, 2019 **** THE WALL STREET JOURNAL.
EXCHANGE
makes him more open than his fa-
ther to looking at companies
where he thinks the management
is doing a good job.
What they do share is a cyni-
cal—and sometimes adolescent—
sense of humor and a fascination
with philosophy and strategy. They
both cite lines from Sun Tzu’s
book “The Art of War.”
Icahn Enterprises, which has in-
habited the 47th floor and part of
the 46th floor of the famed Gen-
eral Motors building in Midtown
Manhattan for roughly two de-
cades, is now in transition. In re-
cent weeks, yellow sticky notes
were affixed to select pieces of
artwork that will head to So-
theby’s instead of making the trip
south. (Unmarked items included
two of Mr. Icahn’s favorites: One is
a painting by the French artist
Meissonier depicting Napoleon,
whose story Mr. Icahn says “typi-
fies the problem with hubris.” The
other is a small tin sign that
shows a man playing poker and
reads “Bluffing: A Pair of Balls
Beats Everything!” The offices’
heavy drapery and tufted leather
chairs, reminiscent of a 90s-era
boardroom, will soon be carted out
to make way for new occupants.
Mr. Icahn, a lifelong New Yorker,
captured Wall Street’s attention in
the 1980s as a corporate raider
clashing with companies like TWA.Over the years he refined his ap-
proach and helped usher in a new
form of investing known as share-
holder activism, along the way
drawing accusations that he was a
corporate holdup artist. Mr. Icahn
in 1985 began pushing for bigger
cost savings and asset sales at TWA
and later that year gained control
of the struggling airline. It contin-
ued to flounder, however, and spent
much of the 1990s in bankruptcy
court before being acquired by
American Airlines in 2001.
In a court deposition, Mr. Icahn
once described a confrontation
with TWA’s CEO at the time, C.E.
“Ed” Meyer, in a hotel bar: “[Mr.
Meyer] said, ‘All you want is a fast
buck.’” Mr Icahn said he then re-
sponded: “If we are psychoanalyz-
ing each other, why don’t you ad-
mit...what you really care about is
your job, and you are afraid I am
going to take it away from you.”
Mr. Icahn’s ambitions today are
as big as they have ever been,
even though his investment fund’s
returns lately have been lackluster.
In the past several weeks alone, he
has been busy on new campaigns
and tried—unsuccessfully, so far—
to wrest power from Occidental
Petroleum Corp.’s board after it
oversaw what he considers a reck-
less $38 billion acquisition.
As he has for most of his career,
Mr. Icahn eschews hands-on analy-
sis, preferring instead to go with
his gut. He boils his campaigns
down to one or two alleged trans-
gressions of chief executives such
as excessive pay that he repeats—
often, loudly and on TV if neces-
sary—until they capitulate. Mr.
Icahn has twice battled efforts by
Michael Dell to rejigger ownership
of his eponymous computer maker,
arguing last year that Mr. Dell’s bid
to take the company public through
a complex transaction amounted to
an $11 billion seizure of value from
other shareholders. His complaints
ultimately prompted the company
to sweeten the deal.
Glued to his work for much of his
children’s upbringing, Mr. Icahn
grew close to Brett over weekend
walks in Central Park or around Bed-ford, N.Y., in which he would lecture
his son on investment theory and
other topics. Brett was “like a
sponge,” his father says. As Brett en-
tered his teenage years, he and his
father began playing chess. The two
for years played Sunday-evening
matches, but they stopped about a
year ago after Brett consistently
won, at times costing his father as
much as $20,000 in lost wagers.
Mr. Icahn says he came to real-
ize he couldn’t compete with Brett.
When he went to Brett’s 35th
birthday party at his son’s Hell’s
Kitchen apartment in Manhattan,
he met Brett’s Yugoslav superin-
tendent. The man told Mr. Icahn
he must be so proud of his son,
because he’d never seen anybody
work as hard as Brett. Mr. Icahn,
caught off guard, asked what he
meant. The superintendent re-
sponded that every time he went
to his apartment, Brett would be
studying chess games left out on
tables, sometimes as many as
three at a time. Brett also put in
long hours with a chess teacher.
That level of study never ap-
pealed to Mr. Icahn, who likes to
boast about how he paid for much
of his tuition at Princeton with
poker earnings. “A good poker
player has to be willing to take big
gambles. A good chess player
rarely takes a gamble,” Mr. Icahn
says. “The great investor is some-
where in between.”
Brett worked for his father for
roughly 15 years, starting as a low-
level analyst. He stepped away for
the past few but remained involved
as a consultant and currently repre-
sents his father’s interests on the
board of Newell Brands Inc., the
maker of Sharpies, Rubbermaid
containers and Elmer’s glue. It’s a
so far money-losing investment
that Brett has said wasn’t his idea.
He previously had considerable
success running a more than $6 bil-
lion fund at Icahn Enterprises that
averaged an annualized return of
around 27% over seven years end-ing in 2016. He and his partner, Da-
vid Schechter, gained recognition
on Wall Street for prompting Mr.
Icahn to make a hugely profitable
investment in Netflix Inc. The Net-
flix investment, which Mr. Icahn
was initially skeptical of, ultimately
made the firm a $2 billion profit
and they each earned $280 million
paydays at the end of their run,
equal to 7.5% of their gains over an
annual return hurdle of 4%.
In 2014, Brett and Mr. Schechter
planned to start their own activist
hedge fund with about $1 billion
from the elder Mr. Icahn in a move
that would have allowed them to
keep even more of their own prof-
its, but negotiations fell apart.
At the new fund, Brett will be
required to put a small percentage
of his own money into each invest-
ment and is contemplating buying
$25 million worth of Icahn Enter-
prises shares. His father will likely
have the final say over invest-
ments under the arrangement.
(Mr. Icahn, whose personal fortune
Forbes magazine pegs at nearly
$18 billion, doesn’t manage outside
money anymore.)
The move to Miami, where Mr.
Icahn is already living and where
the office will be opened in April,
could help ease Brett’s way back
into the firm, though Mr. Icahn says
that is not what prompted it. Brett
already spends a lot of time there
with his girlfriend—the model and
culinary student Erin Christoff—
and their dog and plans to buy a
place nearer to the company’s new
digs. His sister, Michelle, and her
husband, who works for the firm,
also plan to move to Florida with
their two children.
Mr. Icahn told his roughly 50 em-
ployees in a note last month that
he’s moving so he can enjoy “a
warmer climate and a more casual
pace year-round.” Mr. Icahn, who
has lived in New York since he was
raised in a modest home in Queens,
says he has grown tired of the city’s
crowds and high taxes. He insists
the move wasn’t prompted by any-
thing more than frustration with
New York, a desire to play tennis
more frequently and the fact that
the internet has made it possible to
do his work anywhere. He has no
immediate plans to sell his Manhat-
tan penthouse, mainly because of
New York’s falling real-estate prices.
“New York isn’t what it was when
I was young,” he says, adding that
he’s given a lot to the city including
a school of medicine at Mount Sinai
Health System, a stadium on Ran-
dall’s Island and multiple charter
schools bearing his name.
Most of Mr. Icahn’s longtime
top lieutenants are expected to
join him in Miami, though he says
a handful of other staffers won’t.
He is outfitting space in a modern
office tower north of the city that
he says isn’t really his style and
will likely look like the set of “Bil-
lions,” the TV show about a fic-
tional hedge fund. It’s close to his
beachfront estate on the exclusive
Indian Creek island where he and
his second wife, Gail, and their
three dogs are now spending more
of their time.
His investment fund lost 8.8%
through the first half of the year,
the most recent period for which
results are publicly available, and
has had an annualized return of
5.4% since its 2004 inception. Mr.
Icahn likes to point out that the
fund only accounts for a portion of
Icahn Enterprises and that he
heavily hedges his bets, which
mutes profits. The rest of the busi-
ness is a collection of companies
he controls in areas like energy,
food-packaging and home furnish-
ings. Taken as a whole, Icahn En-
terprises, which trades publicly,
has posted returns of 1757% since
its 2000 inception, including divi-
dend reinvestments, or 15.9% an-
nually. Nine of his activist cam-
paigns have yielded profits of
more than $1 billion.
The investment fund’s largest
positions include a more than $1
billion stake in Occidental, whose
languishing share price Mr. Icahn
has been unable to boost since it
bought Anadarko Petroleum Corp.
in August. He has embarked on a
public campaign against Occiden-
tal CEO Vicki Hollub, who he be-
lieves pursued the deal to fend off
suitors of her own.
A rarely employed maneuver by
Mr. Icahn to call a special meeting
of Occidental shareholders to try
to replace board members has
stalled after he failed to get hold-
ers of 20% of the shares outstand-
ing to join the cause. His next ma-
jor opportunity to shake things up
is to launch a proxy fight ahead of
next year’s annual meeting.
Mr. Icahn hasn’t managed outside
money since 2011 and therefore
doesn’t have to worry about inves-
tors getting impatient and possibly
leaving, as most hedge funds do. He
says that unlike many of his peers,
he has the luxury of embarking on
long slogs like at Xerox Holdings
Corp., which he and a partner took
control of after scuttling its planned
merger with Fujifilm Holdings Corp.
Xerox’s stock price has risen
roughly 50% so far this year.
“The height of a deal for me,
there’s nothing like it,” he says.
“I really enjoy it.”the potential for infinite losses—
while Brett generally avoids them.
It’s clear the elder Mr. Icahn
has no plans to slow down any-
time soon. He envisions keeping
up his recent rate of roughly five
new activist campaigns a year and
says nothing compares to the thrill
of being immersed in a negotia-
tion. By most accounts, he’s still
mentally sharp, able to zero in on
inconsistencies in an opponent’s
reasoning or rattle off the mechan-
ics of a complex trade.
He spent his own birthday week-
end earlier this year urging Caesars
Entertainment Corp. to put itself up
for sale. Caesars had spurned take-
over approaches Mr. Icahn wanted
it to take more seriously, believing
the casino company would be bet-
ter managed in the hands of a rival
and that shareholders, rather than
the board, should have the final
say. Caesars in June struck a
roughly $9 billion deal to sell itself
to Eldorado Resorts Inc. and its
shares soared.
“I like what I do. I’ve been doing
more lately,” Mr. Icahn says in one
of a series of interviews over the
past several months. Still, he’s mak-
ing plans for the future and has also
permitted his daughter, Michelle, to
help a director produce a documen-
tary on his life for a cable channel.
He says he has no plans to re-
tire, but that when he does,
Brett—long his heir apparent—is
the best candidate he knows to
take over the job.
“I don’t think anybody can fill his
shoes the way he fills them,” Brett
says. “But I look forward to continu-
ing to make him a lot of money and
continuing to develop my career.”
Brett is a more data-driven in-
vestor who centers decisions
around finding stocks that appear
to be undervalued and buying
them at the right time in the mar-
ket cycle. He has an easier time
than his father spending time out-
side of the office and is often trav-
eling the world with his girlfriend
or honing his chess game.
Brett planned to join his father’s
firm right after graduating from
Princeton University but pushed
back his start date to spend time
in South Africa working on a
movie about the collapse of its
currency and later launched a vid-
eogame publishing company with a
friend. After joining Icahn Enter-
prises he steered the firm toward
profitable investments like one in
Apple Inc., which Mr. Icahn admits
he wouldn’t have considered be-
cause it didn’t have as strong of an
activism angle as usual and was al-
ready richly priced.
“The activism formula is a great
formula for increasing shareholder
value. My father has proven that,”
Brett says. “But I don’t think you
absolutely need to have activism
for there to be a good risk-reward
ratio in an investment.” ThatContinued from page B1Carl Icahn Is
Close to Deal
With His Son
Carl Icahn captured Wall Street’s attention in the 1980s as a corporate raider clashing with companies like
TWA, top, and Texaco, right. Here he is, left, playing his preferred game of poker at a 2004 tournament.Brett Icahn, right, is the “leading candidate” to run Icahn Enterprises once Carl Icahn, left, is ready to let go.ICAHN-OGRAPHY
Carl
Age: 83
Family:wife, two chil-
dren, two stepchildren
Education:Princeton University
Investing style:primarily activist
Personality:outspoken
Wealth:$17.6 billion*
Game Of Choice:poker
Raised:Far Rockaway, N.Y.
Notable Investments:Dell, TWABrett
Age: 40
Family:not married,
has a girlfriend of
more than three years
Education:Princeton University
Investing style:activist and
passive
Personality:laid back
Wealth:unknown
Game Of Choice:chess
Raised:New York area
Notable Investments:Netflix,
AppleSource: Forbes magazine (wealth)Winning Hand
Carl Icahn’s most profitable activist investments*Figures as of Oct. 14
Source: Icahn Enterprises$3.82 billion
2.22
2.00
1.96
1.83
1.26
1.25
1.21
1.07
0.99- CVR Energy
XO Communications
Netflix
Forest Labs/Actavis
Apple
Tropicana Entertainment
NEG Oil & Gas
eBay/PayPal
American Railcar Leasing
Herbalife
RANK INVESTMENT TOTAL PROFIT2.
3.
4.
5.
6.
7.
8.
9.
10.Profits realizedProfits not yet
realized*FROM TOP TO BOTTOM: BETTMANN ARCHIVE/GETTY IMAGES; MITCHELL LEVY/GLOBE PHOTOS/ZUMA PRESS; PETER MORGAN/ASSOCIATED PRESSANDREW GOMBERT/EPA