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Carl Icahn is threatening what would be the mother of all proxy battles, academics said on Wednesday.

The billionaire financier is preparing to field a slate of candidates to try to seize control of the board of Time Warner, the world’s biggest media company.

No company of similar size to Time Warner, which has a market capitalisation of almost $84bn, has faced a proxy contest for control of its board, academics said.

Lucian Bebchuk, director of Harvard Law School’s corporate governance programme, said the most likely outcome of Mr Icahn’s planned proxy contest was a settlement with Time Warner’s 14-member board.

He said if the board concluded that Mr Icahn’s slate of eight candidates had a realistic chance of ousting the sitting directors, those incumbents would yield to at least some of his demands for sales of assets and share buy-backs.

James Cox, a professor of securities law at Duke Law School, said that while Mr Icahn was threatening a credible proxy contest, it was unlikely to reach a conclusion because Time Warner’s directors would act on his demands and possibly offer him limited representation on the board.

Mr Icahn has the resources to mount an effective proxy contest, and his cause has been bolstered by his hiring of Lazard, the investment bank.

Research by Mr Bebchuck highlights the relatively few examples in the US of successful attempts by shareholders to seize control of boards by installing their preferred candidates as directors.

He found that between 1996 and 2004, only about 110 public companies faced proxy battles where shareholders were seeking to oust sitting directors and replace them with their chosen candidates.

The number of such battles at companies with market capitalisations of more than $200m was 20. Of those, shareholders were successful in just two cases.

One of the problems for disgruntled shareholders is the cost. First, they have to pay for printing and mailing proxy statements, which form the basis for voting at annual meetings. These statements contain the rival slate of candidates the disgruntled shareholders want on the board.

Second, the shareholders have to engage in a sustained campaign to persuade investors of the merits for change, which is expensive. Roy Disney used a private jet to fly around the US last year to make his case to Walt Disney’s institutional investors about why they should withhold their support for Michael Eisner, the chairman and chief executive at the time.

Mr Icahn has considerable resources at his disposal, but will have to make a cost-benefit analysis of his planned proxy contest. Mr Bebchuck highlights how any increase in a company’s stock value after a successful proxy contest may not be enough to offset the costs to the shareholders of organising it.

Institutional Shareholder Services, the proxy advisory firm, said Mr Icahn’s actions highlighted the growing role of hedge funds in activism by shareholders.

Copyright The Financial Times Limited 2017. All rights reserved.
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