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Icahn v. Ackman – How $4.5M Turned Into Almost $9M

Two superstar hedge fund managers have been in a tiff since 2004, reports the New York Times. The pair in question is Carl Icahn and Pershing Square’s Bill Ackman. Ackman calls Icahn “a shakedown artist” and says “his word is worthless” while Icahn that Ackman is “now the young gunfighter who wants to show he beat the older gunfighter with a big reputation. He just likes pounding himself on the chest.”

PERSHING SQUARE

So, What’s the Deal with Icahn and Ackman?

Ackman met Icahn in 2003. At that time, Ackman was a virtual unknown and he was in water that was hot if not deep. A fund he helped found, Gotham Partners, had “blown up,” he was being investigated by the SEC and the attorney general of New York and his investors wanted their money back. Ackman took the bold move of “cold-calling” Icahn. Ackman was offering Hallwood Realty, a company trading at $60 a share that Ackman valued at $140 a share. According to the New York Times, “Icahn said he would pay Ackman $80 a share and offered a form of insurance. If Icahn unloaded his shares within three years, the two would split any profit above a 10 percent return.” Ackman “included a provision that if the payout became contentious, the loser would pay all the legal fees. And if any payment was delayed, the contract stipulated, Mr. Icahn would owe Mr. Ackman a hefty amount of interest.” In 2004, Hallwood merged with another company for $137 a share. Icahn refused to cut Ackman in, saying that he didn’t sell the shares. Ackman countered that if he doesn’t still own the shares, they were “sold” and he should be cut in. Ultimately, Ackman took his case to court.

Putting the Icahn – Ackman Dispute in Perspective

Icahn and Ackman have been in a battle for seven years over roughly $4.5 million, the amount that would have been Ackman’s after the Hallwood merger in 2004. Keep in mind, the sum may be large but not so much for these guys. Forbes ranks the 75-year-old Icahn as the 25th richest man in American, with a net worth of $13 billion. Forbes gave the 45-year-old Ackman an estimated net worth of $700 million in 2010, calling him a “Billionaire in the Making“. This also means that he will likely make the “list” soon; the smallest net worth on Forbes’ list of the 400 richest Americans is $1.05 billion.

In the end, “Mr. Ackman received nearly $9 million from Mr. Icahn, almost double the original amount, thanks to the accrued interest.”

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