NEW YORK, Oct. 11 /PRNewswire/ -- Carl Icahn today announced that Icahn
Partners LP, Icahn Partners Master Fund LP, Franklin Mutual Advisers, LLC,
JANA Partners LLC, JANA Master Fund, Ltd., S.A.C. Capital Advisors, LLC and
S.A.C. Capital Associates, LLC have written an open letter to shareholders of
Time Warner Inc. (NYSE: TWX). The text of the letter appears below.

    SECURITY HOLDERS ARE ADVISED TO READ THE PROXY STATEMENT AND OTHER
DOCUMENTS RELATED TO THE SOLICITATION OF PROXIES BY ICAHN PARTNERS LP, ICAHN
PARTNERS MASTER FUND LP, FRANKLIN MUTUAL ADVISERS, LLC, JANA PARTNERS LLC,
JANA MASTER FUND, LTD., S.A.C. CAPITAL ADVISORS, LLC, S.A.C. CAPITAL
ASSOCIATES, LLC AND CERTAIN OF THEIR RESPECTIVE AFFILIATES FROM THE
STOCKHOLDERS OF TIME WARNER INC. FOR USE AT ITS ANNUAL MEETING WHEN THEY
BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION, INCLUDING
INFORMATION RELATING TO THE PARTICIPANTS IN SUCH PROXY SOLICITATION. WHEN
COMPLETED, A DEFINITIVE PROXY STATEMENT AND A FORM OF PROXY WILL BE MAILED TO
STOCKHOLDERS OF TIME WARNER INC. AND WILL BE AVAILABLE AT NO CHARGE AT THE
SECURITIES AND EXCHANGE COMMISSION'S WEBSITE AT HTTP://WWW.SEC.GOV.
INFORMATION RELATING TO THE PARTICIPANTS IN SUCH PROXY SOLICITATION IS
CONTAINED IN EXHIBIT 1 TO THE SCHEDULE 14A FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION BY ICAHN PARTNERS LP ON OCTOBER 11, 2005.

    Dear Time Warner Shareholder:
    In life and in business, there are two cardinal sins. The first is to act
precipitously without thought, and the second is to not act at all.
Unfortunately, the Board of Directors and top management of Time Warner
already committed the first sin by merging with AOL, and we believe they are
currently in the process of committing the second; now is not a time to move
slowly and suffer the paralysis of inaction, yet we fear based on their recent
statements that the current leadership of Time Warner does not recognize the
need to take bold action for shareholders.  The Time Warner PR machine would
like you to believe that Mr. Parsons and the Time Warner Board have been
performing well and taking the necessary steps to deliver value for
shareholders, and it appears that many in the press have accepted this
storyline.  But after taking a closer look at the years following the merger
with AOL, it is clear that there have been a series of significant missteps by
the Board and Time Warner's senior management which have resulted in the
further destruction of value.  Unless this legacy of poor decision-making is
fully recognized and the Board is held accountable, the dismal record of
mistakes and inaction will continue to the detriment of shareholders.  Let us
examine the record.

    The AOL Disaster
    Understandably, the Board and top management at Time Warner wish to put
their role in the disastrous merger of AOL and Time Warner behind them.  The
AOL disaster resulted in an incredible over $87 billion of goodwill
write-downs over a two year period (greater than the current equity market
capitalization of today's Time Warner) and the loss of over 75% of the
Company's market value in two years.  However, when we match the fingerprints
on the deal with those of the current directors, it becomes clear that the
direction of the Company is still largely in the hands of those who played key
roles in the merger.  Of the eleven pre-merger Time Warner directors who
approved the deal, seven still sit on the Board.  Five other current directors
came from the pre-merger AOL and also voted for the merger, bringing the total
number of supporters of the merger to twelve out of fifteen on the current
Board.  Richard Parsons, the President of Time Warner at the time and a key
negotiator of the merger, was afterwards promoted to CEO and later Chairman as
well.
    The lingering presence of these individuals forces us to ask, why are a
majority of the same directors who signed off on the disastrous AOL merger
still steering the corporate ship?  We also note that we are not the first to
raise questions about the qualifications of the current members of the Board.
In 2003, Institutional Shareholder Services recommended that shareholders
withhold support for two current directors (Miles Gilburne and James
Barksdale) saying they were too closely tied to the Company.  Also in 2003,
CalPERS (the nation's largest pension fund) withheld its votes for two of the
current directors citing questions about their independence.  Describing the
corporate culture at Time Warner in 2003 following the resignation of Ted
Turner (who founded CNN) and Warren Lieberfarb (who has been credited with
helping to invent the DVD market) from the Company's management, Sanford C.
Bernstein's Tom Wolzien said, "These twin departures signify a fundamental
shift to the bland by a company that now has no place for genius or contrary
points of view."
    We believe that in the time following the merger the Board compounded
their already colossal mistake by failing to hold management accountable to
more quickly address the subscriber deterioration at AOL.  Company management
clearly had an early belief in broadband evidenced by the billions spent on
Time Warner Cable, yet failed to effectively address the migration of AOL
dial-up subscribers to broadband access providers (punctuating the question of
why they merged with an approximately $150 billion narrowband business).
While AOL was losing dial-up subscribers (approximately 9 million since 2001),
Time Warner Cable promoted its own broadband service, Road Runner, yet never
effectively promoted AOL on or integrated AOL with this platform.
Additionally, during this time the Company allowed AOL to be marginalized on
the internet while portals such as Yahoo! and search pioneers like Google
captured larger online market share and currently have equity market values of
greater than $45 and $85 billion, respectively.  We believe that had the Board
forced management to move more quickly, they could have not only demonstrated
a commitment to the driving principle behind the merger (synergies between AOL
and the Time Warner businesses), but perhaps could have preserved at least
some of the shareholder value destroyed by the merger.  Recently top
management has begun highlighting AOL as a valuable asset and growth
opportunity - where have they been since 2000?  To the extent that
opportunities are now available to enhance value at AOL, which we believe
there are, we implore management and the Board to move more decisively than
they have in the past.

    Fire Sale Prices Have Stripped Value from the Shareholders and Created
Windfalls for Others
    Time Warner management and the Board have sold valuable assets at prices
that were at a substantial discount to their underlying value, thereby giving
a windfall to buyers to the detriment of their own shareholders.

    -- Sale of Warner Music - We believe that the sale of the Warner Music
       Group ("Warner Music") last year to a consortium of private equity
       buyers for $2.6 billion demonstrated both a lack of business judgment
       by the Board and Mr. Parsons and an inability to operate businesses
       efficiently.  First, we believe the Company received a trough valuation
       and could not have chosen a worse time to sell this business given the
       state of the music industry at the time.  In the ultimate embarrassment
       to Time Warner, Warner Music's current post-IPO enterprise value of
       over $4.7 billion, is an 81% increase over the sale price (before even
       taking into account that the buyer group had already recouped the
       equity portion of their investment through pre-IPO dividends).  Second,
       the fact that Warner Music had greater value to a group of financial
       investors than to the world's largest media company is difficult to
       conceive, yet the private equity group was able to find $250 million in
       cost savings in just one year of ownership, more than the trailing
       twelve month EBITDA of the business when Time Warner owned the company.
       Rather than unloading this valuable asset, we believe that the Board
       should have challenged management regarding potential cost savings and
       forced management to turn this asset around.  We believe Time Warner
       clearly would have created far more value and lessened the debt burden
       on the Company had it focused more on the operations of Warner Music
       than on unloading it for what proved to be a cut-rate price.

    -- Sale of Comedy Central - The Board supported management's decision to
       sell the Company's 50% interest in Comedy Central to Viacom in 2003 for
       $1.225 billion.  Less than two years later, Morgan Stanley estimates
       the value of Comedy Central at greater than $4.5 billion(1), implying a
       valuation of $2.25 billion for Time Warner's stake, 83% more than it
       was sold for.  Similar to the Warner Music sale, we believe the
       Company's management sold Comedy Central in an effort to appear
       proactive but achieved only a loss of value for shareholders.

    These asset sales were consummated to achieve the goal of debt reduction.
This goal, which in hindsight proved unnecessary (since Time Warner is
currently underleveraged and has sufficient cash flow to support a much higher
debt load), caused Time Warner management to sell valuable assets at
distressed prices and thereby destroy shareholder value.  We believe that if
the Board had provided the appropriate level of oversight, Time Warner
management might have focused more on delivering value through the operations
of the businesses or on receiving full value for the assets.

    Failure to Acquire MGM
    The Company cited "fiscal discipline" when it publicly withdrew from the
bidding for MGM last year.  However, we believe that Time Warner management's
habitual excess deliberation and inability to act decisively on behalf of
shareholders were actually behind the Company's failure to win this important
strategic acquisition.  According to the MGM proxy statement and news reports,
Time Warner had the opportunity to complete the deal in early August without
competition from the Sony group and was the favored bidder of Kirk Kerkorian,
MGM's controlling shareholder at the time.  Yet Time Warner let three weeks
slip away which ultimately paved the way for a group led by Sony Corporation
to win the deal.  Then ten days later it made a last ditch effort to increase
its bid only 90 minutes prior to the MGM Board vote, an attempt which was
ultimately unsuccessful because Time Warner could not negotiate a deal in
time.  As a result of the mismanagement of this process, MGM's extensive
content library is today controlled by a major studio competitor (Sony) and a
major cable competitor (Comcast).  As a writer for the New York Times put it
afterwards, "Time Warner's last-minute effort raises some awkward questions
about the earlier comments of Mr. Parsons about withdrawing from the deal.  If
buying MGM was too expensive, as he had said, how would he justify making an
even higher offer later?"

    Bloated Cost Structure
    We believe Time Warner has allowed costs to become bloated due to a lack
of oversight by the Board and senior management.  Nowhere is this more evident
than by looking at the Company's landmark headquarters in New York, which cost
the Company $800 million to construct and offers such lavish features as a
grand employee cafeteria with two story windows overlooking Central Park.  We
question how such an extravagant building, which houses only a small fraction
of Time Warner's employees, enhances shareholder value (and cannot help but
wonder where the shareholders get to eat lunch).  Given this extravagance and
the failure to cut costs at businesses like Warner Music described above, we
intend to hire, in the next few weeks, an industry consultant to analyze and
compare Time Warner's costs to its peers on a number of different levels to
determine what other excess fat may lie in the Company's cost structure,
including, but not limited to, perquisites afforded to the Board and top
management.

    Conclusion
    We have previously made certain proposals in an eleven page position paper
which we believe, if followed, will meaningfully enhance shareholder value.
First and foremost, we believe that the greatest investment the Board can make
at this time is to initiate a $20 billion share buyback.  The Board should not
lose this opportunity to benefit all shareholders by taking decisive action.
We also believe that all of Time Warner Cable should be spun out to give
shareholders a choice of owning the world's best collection of content assets,
a well run and growing cable franchise or some combination of both.
Furthermore, although we are generally supportive of the recent acquisition of
the assets of Adelphia, we are baffled by the logic of taking Time Warner
Cable public through the issuance of 16% of the shares to former Adelphia
distressed debt investors, an example we believe of poor execution by
management and a lack of adequate oversight by the Board.  To follow the
current course of a $5 billion buyback and the public distribution of only 16%
of Time Warner Cable would be akin to inaction, which is inexcusable at this
juncture, and would be yet another example of the Board's inability to
perform.
    But whether or not you agree with our proposals, we believe the simple
truth is that Time Warner is a company sorely in need of new shareholder
representation on the Board.  We believe that Time Warner owns the most
valuable collection of media properties in the industry and in fact the plan
we have proposed is predicated upon the ultimate recognition of this value by
the market.  However, we think that there is a clear distinction to be made
between the value of these assets and the creative skill of the day-to-day
operators on the one hand and the demonstrable failure of top management and
the Board to translate this value into returns for shareholders on the other.
    Mr. Parsons has admitted that Time Warner's shares are undervalued and has
made statements asserting that he intends to do something about it, but we
believe that without the necessary conviction at the Board level no meaningful
action will be taken.  As we have described above, we believe the current
Board has demonstrated to date an inability to preserve or create shareholder
value.  At the very least, bringing a new voice for shareholders to the Board
will serve to remind the Board and management of their promises and
priorities.  It will also make the Board aware that it is accountable to the
shareholders and will send a clear message that shareholders' patience is
running out.
    The incumbent members of the Board and top management may argue that the
presence of new directors would be disruptive or is unnecessary.  We believe
however, the presence of new independent directors who will aggressively
question excessive costs and management and director perquisites and work with
management to deliver value for shareholders is exactly the type of disruption
that Time Warner needs.  With respect to whether a new voice for shareholders
on the Board is necessary, we believe a review of the Company's stock price
performance and the record described above should effectively end any argument
that the Board is doing an adequate job and should be left to its own
continued devices.  Given the fact that, despite its exceptional assets and a
generally favorable operating environment, the Company's stock price has
underperformed significantly since 2002, we believe the time for steps to make
the Board and management more accountable are long overdue.  Mr. Parsons and
the Board have made promises to address the stagnating stock price, but
without new shareholder representation on the Board, we believe these
promises, like so many others, will not be kept.
    Shareholder expectations for the boards and senior managements of publicly
held companies have changed dramatically in recent years.  Shareholders across
the globe have increasingly begun to realize that many of our managements and
boards have failed to aggressively pursue value for shareholders and are
holding them accountable.  Additionally they have become outraged at the
perquisites and inflated pay that "rubber stamp" boards award themselves and
top management in situations where share prices have languished.  We believe
this is a healthy and necessary phenomenon and that there should be no sacred
cows in the pursuit of shareholder value.  In the coming months we will be
continuing to speak out about our belief in the need for a new voice for
shareholders on the Board of Time Warner. We already know that many of you
agree and look forward to communicating with you in the future.

    SECURITY HOLDERS ARE ADVISED TO READ THE PROXY STATEMENT AND OTHER
DOCUMENTS RELATED TO THE SOLICITATION OF PROXIES BY ICAHN PARTNERS LP, ICAHN
PARTNERS MASTER FUND LP, FRANKLIN MUTUAL ADVISERS, LLC, JANA PARTNERS LLC,
JANA MASTER FUND, LTD., S.A.C. CAPITAL ADVISORS, LLC, S.A.C. CAPITAL
ASSOCIATES, LLC AND CERTAIN OF THEIR RESPECTIVE AFFILIATES FROM THE
STOCKHOLDERS OF TIME WARNER INC. FOR USE AT ITS ANNUAL MEETING WHEN THEY
BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION, INCLUDING
INFORMATION RELATING TO THE PARTICIPANTS IN SUCH PROXY SOLICITATION. WHEN
COMPLETED, A DEFINITIVE PROXY STATEMENT AND A FORM OF PROXY WILL BE MAILED TO
STOCKHOLDERS OF TIME WARNER INC. AND WILL BE AVAILABLE AT NO CHARGE AT THE
SECURITIES AND EXCHANGE COMMISSION'S WEBSITE AT HTTP://WWW.SEC.GOV.
INFORMATION RELATING TO THE PARTICIPANTS IN SUCH PROXY SOLICITATION IS
CONTAINED IN EXHIBIT 1 TO THE SCHEDULE 14A FILED BY ICAHN PARTNERS LP WITH THE
SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 11, 2005 WITH RESPECT TO TIME
WARNER INC. THAT SCHEDULE 14A IS CURRENTLY AVAILABLE AT NO CHARGE ON THE
SECURITIES AND EXCHANGE COMMISSION'S WEBSITE.

    THIS LETTER IS FOR GENERAL INFORMATIONAL PURPOSES ONLY. IT DOES NOT HAVE
REGARD TO THE SPECIFIC INVESTMENT OBJECTIVE, FINANCIAL SITUATION, SUITABILITY,
OR THE PARTICULAR NEED OF ANY SPECIFIC PERSON WHO MAY RECEIVE THIS LETTER. THE
VIEWS EXPRESSED HEREIN REPRESENT THE OPINIONS OF THE ICAHN GROUP, AND ARE
BASED ON PUBLICLY AVAILABLE INFORMATION WITH RESPECT TO TIME WARNER INC. (THE
"ISSUER"). CERTAIN FINANCIAL DATA HAS BEEN DERIVED FROM FILINGS MADE WITH THE
SECURITIES AND EXCHANGE COMMISSION ("SEC") BY THE ISSUER AND CERTAIN
COMPARABLE COMPANIES. INFORMATION INDICATED HEREIN AS HAVING BEEN OBTAINED
FROM THIRD PARTIES IS USED WITHOUT ANY EXPRESS CONSENT OF SUCH THIRD PARTIES
AND SHOULD NOT BE VIEWED AS INDICATING THE SUPPORT OF SUCH PERSONS FOR THE
VIEWS EXPRESSED HEREIN. NO WARRANTY IS MADE THAT SUCH SEC FILING DATA OR THIRD
PARTY DATA IS ACCURATE. THE ICAHN GROUP SHALL NOT BE HELD LIABLE FOR ANY
MISINFORMATION CONTAINED IN ANY SEC FILING OR THIRD PARTY REPORT. THIS LETTER
DOES NOT RECOMMEND THE PURCHASE OR SALE OF ANY SECURITY. UNDER NO
CIRCUMSTANCES IS THIS REPORT TO BE USED OR CONSIDERED AS AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITY. MEMBERS OF THE ICAHN GROUP
CURRENTLY HOLD OPTIONS AND SHARES OF COMMON STOCK REPRESENTING AN AGGREGATE
BENEFICIAL OWNERSHIP OF, IN THE AGGREGATE, APPROXIMATELY 2.8% OF THE
OUTSTANDING COMMON STOCK OF THE ISSUER. ONE OR MORE MEMBERS OF THE ICAHN GROUP
MAY FROM TIME TO TIME SELL ALL OR A PORTION OF THEIR SHARES IN THE OPEN MARKET
TRANSACTIONS OR OTHERWISE (INCLUDING VIA SHORT SALES), BUY ADDITIONAL SHARES
(IN OPEN MARKET OR PRIVATELY NEGOTIATED TRANSACTIONS, BY TENDER OFFER, OR
OTHERWISE), OR TRADE IN OPTIONS, PUTS, CALLS OR OTHER DERIVATIVE INSTRUMENTS
RELATING TO SUCH SHARES. THE MEMBERS OF THE ICAHN GROUP ALSO RESERVE THE RIGHT
TO TAKE SUCH ACTIONS WITH RESPECT TO THEIR INVESTMENTS IN THE ISSUER AS THEY
MAY DEEM APPROPRIATE, INCLUDING, BUT NOT LIMITED TO, COMMUNICATING WITH THE
ISSUER AND OTHER INVESTORS, CONDUCTING A PROXY SOLICITATION, OR OTHER ACTIONS.
MEMBERS OF THE ICAHN GROUP RESERVE THE RIGHT TO CHANGE THEIR OPINIONS
REGARDING THE ISSUER AT ANY POINT IN TIME AS THEY DEEM NECESSARY. THE ICAHN
GROUP DISCLAIMS ANY OBLIGATION TO UPDATE THE INFORMATION CONTAINED HEREIN.

    (1) Morgan Stanley research report dated August 5th, 2005

Link to this page: