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August 26, 2008 2:43 PM

Wallet-to-Wallet Combat, Icahn v. Lipton

Posted by Brian Baxter

Billionaire financier and shareholder activist Carl Icahn and legendary M&A lawyer and poison pill inventor Martin Lipton have been longtime adversaries. But now Icahn is agitating for another fight, although this time it's in the blogopshere and not the boardroom.

In a Monday posting on his blog The Icahn Report, Icahn takes Lipton, a founding partner of New York's Wachtell, Lipton, Rosen & Katz, to task for claiming that corporate governance ratings don't equate with corporate performance. (Lipton authored the memo--see attachment below--along with Wachtell M&A partner Trevor Norwitz.)

But what really set Icahn off, as noted by The New York Times's DealBook, was Lipton's comments on InBev's recent $52 billion acquisition of Anheuser-Busch.

"Anheuser-Busch is the latest [U.S.] company to fall prey to a hostile takeover shortly after repealing its classified board in the name of adherence to 'best practices in corporate governance,'" write Lipton and Norwitz in their firm memo. "It has been an open question whether the [Corporate Governance Quotient] and similar ratings deserve the homage they have been accorded in the relatively short period since their invention or whether they are merely illusory. That question has now been answered."

The $70-per-share offer for a company whose stock price had faltered in recent years, writes Icahn, isn't exactly a bad deal for shareholders. Icahn seemed particularly incensed by the notion that U.S. companies are being constrained by shareholder activism and thus are at a competitive disadvantage with their more uninhibited international counterparts.

In a swipe at Lipton, Icahn writes, "Over the years, Lipton has built a very lucrative law practice advising big corporate clients on some very clever ways to keep shareholders like hedge funds from having a strong say in companies they hold."

The fact that Icahn is trying to lock horns with Lipton again should come as no surprise. Lipton has long been credited with inventing the poison pill to thwart hostile takeovers, a tactic honed by corporate raiders like Ichan during the 1980s. (In his blog post, Icahn calls the pill "one of the most anti-shareholder provisions ever devised.")

We reached out to Lipton and Norwitz for a response to Ichan's charges. No word back from either yet.

Download "Corporate Governance Ratings Debunked," a July 24 Wachtell, Lipton memo authored by Martin Lipton and Trevor Norwitz.

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