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Source: New York Times DealBook, February 10, 2014 article

Icahn Ends Call for Apple Stock Buyback


Heidi Gutman/CNBC

Carl C. Icahn began amassing shares in Apple last summer.

Updated, 8:52 p.m. | After six months of urging Apple to pay out more money to shareholders, the billionaire Carl C. Icahn dropped his effort on Monday.

His decision came after strong opposition from other big investors and an influential shareholder advisory firm. Still, Mr. Icahn may have prevailed in the end anyway, as Apple continued to emphasize returning money to investors.

In a public letter posted to his website, the septuagenarian activist said that he was backing down from his proposal. But he also sought to claim victory of a sort, pointing to aggressive stock repurchases by Apple in recent weeks.

“We see no reason to persist with our nonbinding proposal, especially when the company is already so close to fulfilling our requested repurchase target,” Mr. Icahn wrote.

Shares in Apple rose 1.8 percent on Monday, to $528.99.

The battle over Mr. Icahn’s nonbinding plan, which called upon Apple to buy back $50 billion worth of shares by Sept. 27, was the latest over the company and its $159 billion chest of cash. A number of investors, including David Einhorn, a fellow hedge fund manager, have demanded that the technology giant buy back shares and pay out special dividends.

But Mr. Icahn, who helped define the art of activist investing in the 1980s, has become Apple’s most persistent gadfly, arguing that the company was depriving shareholders by holding onto so much cash. Using an array of media — including regular television appearances, his website and an active Twitter feed — he has alternately admonished and encouraged Apple’s management to change its policies.

He began amassing a stake in August, a holding that has since grown to roughly $4 billion.

Still, even he could not overcome opposition from other major shareholders and Institutional Shareholder Services, a top adviser to investors on corporate governance matters.

In a report sent to clients on Sunday, the proxy advisory firm argued that Mr. Icahn’s plan would have put undue restrictions on Apple’s board.

“The board’s latitude should not be constricted by a shareholder resolution that would micromanage the company’s capital allocation process,” I.S.S. wrote in its note.

That point has been echoed by other prominent investors, including New York City’s comptroller, Scott M. Stringer, and Calpers, the giant California public pension fund. In an interview on Sunday, the comptroller contended that the Icahn plan would deprive Apple of important financial ballast in an industry known for its volatility.

Both Mr. Stringer and I.S.S. noted that much of Apple’s cash is held overseas and that the company would either need to pay a big tax bill to bring it back or borrow a significant amount of debt to finance a larger stock buyback.

But Mr. Icahn pointed out that I.S.S.’s report also criticized the iPad manufacturer for being “sluggish” in returning excess cash to shareholders and that the company’s plan amounted to bailing out a big ship with “a leaky bucket.”

And he noted that Apple had become aggressive in buying back stock, including by spending $14 billion on repurchases in recent weeks. The company’s chief executive, Timothy Cook, has said that he would provide updates on the shareholder payout plan in March or April.

Mr. Icahn said that he remained optimistic about Apple, including Mr. Cook’s plans to unveil new products later this year and an “opportunistic” and “aggressive” approach to stock buybacks.

A spokesman for Apple declined to comment. But Mr. Stringer was more willing to celebrate publicly. In a post to Twitter on Monday morning, he wrote, “Shareowners force Icahn to say, ‘Icant.’ ”

A version of this article appears in print on 02/11/2014, on page B4 of the NewYork edition with the headline: Icahn Ends Call for Apple Stock Buyback.

© 2014 The New York Times Company


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