Carl Icahn Is Nearing Another Landmark Deal. This Time It’s With His Son. Brett Icahn is emerging as the likely successor to one of the most famous investors of all time. But his father is not ready to hand over the reins just yet. By Cara Lombardo Oct. 19, 2019 12:00 am ET At 83, Carl Icahn, the billionaire financier legendary for waging guerrilla warfare with corporate targets from TWA to Dell, finally has a succession plan. It’s a little complicated. Fed up with New York, Mr. Icahn says he’s moving his hedge fund to Miami and laying the groundwork to hand it over to his son, Brett. Mr. Icahn says Brett is the “leading candidate” to take over the firm—on ce Mr. Icahn is ready to let go, which he doesn’t seem to be just yet. “I’m not going to give up making the real decisions,” Mr. Icahn says. “I’m still in charge, but he’d get a piece of the action.” Brett, 40, is likely to rejoin Icahn Enterprises LP in the coming months after a more than three-year hiatus. He would run a small new investment fund. For over a year on and off, father and son have been negotiating an arrangement that has already stretched to a roughly 90-page contract. Nothing is official yet and neither appears to be in any rush, partly because Brett is bearish on the market and hasn’t seen many good investment opportunities with stocks near all-time highs. His return would reunite two men who are opposites in many ways. Where Carl is outspoken and operates on instinct, Brett is more laid-back and fond of spreadsheets. Brett likes chess, while his father prefers poker. Carl has never been afraid to go on TV to make his views heard, while Brett has operated under the radar for much of his career. The elder Mr. Icahn has long hedged his portfolio with significant short positions—bets that stock prices will decrease that have the potential for infinite losses— while Brett generally avoids them. Brett Icahn, right, is the “leading candidate” to run Icahn Enterprises once Carl Icahn, left, is ready to let go. Photo: ANDREW GOMBERT/EPA It’s clear the elder Mr. Icahn has no plans to slow down anytime soon. He envisions keeping up his recent rate of roughly five new activist campaigns a year and says nothing compares to the thrill of being immersed in a negotiation. By most accounts, he’s still mentally sharp, able to zero in on inconsistencies in an opponent’s reasoning or rattle off the mechanics of a complex trade. He spent his own birthday weekend earlier this year urging Caesars Entertainment Corp. to put itself up for sale. Caesars had spurned takeover approaches Mr. Icahn wanted it to take more seriously, believing the casino company would be better managed in the hands of a rival and that shareholders, rather than the board, should have the final say. Caesars in June struck a roughly $9 billion deal to sell itself to Eldorado Resorts Inc. and its shares soared. “I like what I do. I’ve been doing more lately,” Mr. Icahn says in one of a series of interviews over the past several months. Still, he’s making plans for the future and has also permitted his daughter, Michelle, to help a director produce a documentary on his life for a cable channel. He says he has no plans to retire, but that when he does, Brett—long expected to be his heir apparent—is the best candidate he knows to take over the job. Carl Icahn is not afraid to use public appearances as a way to apply additional pressure on his corporate targets. Here he speaks in New York to CNBC’s Scott Wapner at the 2016 Delivering Alpha Conference. Photo: Heidi Gutman/CNBC/Getty Images “I don’t think anybody can fill his shoes the way he fills them,” Brett says. “But I look forward to continuing to make him a lot of money and continuing to develop my career.” Brett is a more data-driven investor who centers decisions around finding stocks that appear to be undervalued and buying them at the right time in the market cycle. He has an easier time than his father spending time outside of the office and is often traveling the world with his girlfriend or honing his chess game. Brett planned to join his father’s firm right after graduating from Princeton University but pushed back his start date to spend time in South Africa working on a movie about the collapse of its currency and later launched a videogame publishing company with a friend. After joining Icahn Enterprises he steered the firm toward profitable investments like one in Apple Inc., which Mr. Icahn admits he wouldn’t have considered because it didn’t have as strong of an activism angle as usual and was already richly priced. Winning HandCarl Icahn’s most profitable activist investments, by total profitSource: Icahn Enterprises*Profits not yet realized. Figures through Oct. 14. $3.82 billion2.2221.961.831.261.251.211.070.99CVR Energy*XO CommunicationsNetflixForest Labs/ActavisAppleTropicana EntertainmentNEG Oil & GaseBayAmerican Railcar LeasingHerbalife* “The activism formula is a great formula for increasing shareholder value. My father has proven that,” Brett says. “But I don’t think you absolutely need to have activism for there to be a good risk-reward ratio in an investment.” That makes him more open than his father to looking at companies where he thinks the management is doing a good job. What they do share is a cynical—and sometimes adolescent—sense of humor and a fascination with philosophy and strategy. They both cite lines from Sun Tzu’s book “The Art of War.” Icahn Enterprises, which has inhabited the 47th floor and part of the 46th floor of the famed General Motors building in Midtown Manhattan for roughly two decades, is now in transition. In recent weeks, yellow sticky notes were affixed to select pieces of artwork that will head to Sotheby’s instead of making the trip south. (Unmarked items included two of Mr. Icahn’s favorites: One is a painting by the French artist Meissonier depicting Napoleon, whose story Mr. Icahn says “typifies the problem with hubris.” The other is a small tin sign that shows a man playing poker and reads “Bluffing: A Pair of Balls Beats Everything!) The offices’ heavy drapery and tufted leather chairs, reminiscent of a 90s-era boardroom, will soon be carted out to make way for new occupants. Mr. Icahn, a lifelong New Yorker, captured Wall Street’s attention in the 1980s as a corporate raider clashing with companies like TWA. Over the years he refined his approach and helped usher in a new form of investing known as shareholder activism, along the way drawing accusations that he was a corporate holdup artist. Mr. Icahn in 1985 began pushing for bigger cost savings and asset sales at TWA and later that year gained control of the struggling airline. It continued to flounder, however, and spent much of the 1990s in bankruptcy court before being acquired by American Airlines in 2001. Carl Icahn captured Wall Street’s attention in the 1980s as a corporate raider clashing with companies like TWA. Here he speaks at a 1986 press conference about the hiring of new TWA flight attendants and supervisors to replace those who had gone on strike. Photo: Bettmann Archive/Getty Images In a court deposition, Mr. Icahn once described a confrontation with TWA’s CEO at the time, C.E. “Ed” Meyer, in a hotel bar: “[Mr. Meyer] said, ‘All you want is a fast buck.’” Mr Icahn said he then responded: “If we are psychoanalyzing each other, why don’t you admit…what you really care about is your job, and you are afraid I am going to take it away from you.” Mr. Icahn’s ambitions today are as big as they have ever been, even though his investment fund’s returns lately have been lackluster. In the past several weeks alone, he has been busy on new campaigns and tried—unsuccessfully, so far—to wrest power from Occidental Petroleum Corp. ’s board after it oversaw what he considers a reckless $38 billion acquisition. As he has for most of his career, Mr. Icahn eschews hands-on analysis, preferring instead to go with his gut. He boils his campaigns down to one or two alleged transgressions of chief executives such as excessive pay that he repeats -- often, loudly and on TV if necessary -- until they capitulate. Mr. Icahn has twice battled efforts by Michael Dell to rejigger ownership of his eponymous computer maker, arguing last year that Mr. Dell’s bid to take the company public through a complex transaction amounted to an $11 billion seizure of value from other shareholders. His complaints ultimately prompted the company to sweeten the deal. Carl Icahn also clashed in the 1980s with Texaco. Here he appears at a 1988 Texaco stockholders meeting in New York. Photo: Peter Morgan/Associated Press Glued to his work for much of his children’s upbringing, Mr. Icahn grew close to Brett over weekend walks in Central Park or around Bedford, N.Y., in which he would lecture his son on investment theory and other topics. Brett was “like a sponge,” his father says. As Brett entered his teenage years, he and his father began playing chess. The two for years played Sunday-evening matches, but they stopped about a year ago after Brett consistently won, at times costing his father as much as $20,000 in lost wagers. Mr. Icahn says he came to realize he couldn’t compete with Brett. When he went to Brett’s 35th birthday party at his son’s Hell’s Kitchen apartment in Manhattan, he met Brett’s Yugoslav superintendent. The man told Mr. Icahn he must be so proud of his son, because he’d never seen anybody work as hard as Brett. Mr. Icahn, caught off guard, asked what he meant. The superintendent responded that every time he went to his apartment, Brett would be studying chess games left out on tables, sometimes as many as three at a time. Brett also put in long hours with a chess teacher. Carl Icahn’s game of choice is poker, while his son prefers chess. Here Mr. Icahn plays at a 2004 tournament in New York. “A good poker player has to be willing to take big gambles. A good chess player rarely takes a gamble. The great investor is somewhere in between.” Photo: Mitchell Levy/Globe Photos/ZUMA PRESS That level of study never appealed to Mr. Icahn, who likes to boast about how he paid for much of his tuition at Princeton with poker earnings. “A good poker player has to be willing to take big gambles. A good chess player rarely takes a gamble,” Mr. Icahn says. “The great investor is somewhere in between.” Brett worked for his father for roughly 15 years, starting as a low-level analyst. He stepped away for the past few but remained involved as a consultant and currently represents his father’s interests on the board of Newell Brands Inc., the maker of Sharpies, Rubbermaid containers and Elmer’s glue. It’s a so far money-losing investment that Brett has said wasn’t his idea. He previously had considerable success running a more than $6 billion fund at Icahn Enterprises that averaged an annualized return of around 27% over seven years ending in 2016. He and his partner, David Schechter, gained recognition on Wall Street for prompting Mr. Icahn to make a hugely profitable investment in Netflix Inc. The Netflix investment, which Mr. Icahn was initially skeptical of, ultimately made the firm a $2 billion profit and they each earned $280 million paydays at the end of their run, equal to 7.5% of their gains over an annual return hurdle of 4%. In 2014, Brett and Mr. Schechter planned to start their own activist hedge fund with about $1 billion from the elder Mr. Icahn in a move that would have allowed them to keep even more of their own profits, but negotiations fell apart. ICAHN-OGRAPHY Carl Age: 83 Family: wife, two children, two stepchildren Education: Princeton University Investing style: primarily activist Personality: outspoken Wealth: $17.6 billion* Game Of Choice: poker Raised: Far Rockaway, N.Y. Notable Investments: Dell, TWA Brett Age: 40 Family: not married, has a girlfriend of more than three years Education: Princeton University Investing style: activist and passive Personality: laid back Wealth: unknown Game Of Choice: chess Raised: New York area Notable Investments: Netflix, Apple Source: Forbes magazine (wealth) At the new fund, Brett will be required to put a small percentage of his own money into each investment and is contemplating buying $25 million worth of Icahn Enterprises shares. His father will likely have the final say over investments under the arrangement. (Mr. Icahn, whose personal fortune Forbes magazine pegs at nearly $18 billion, doesn’t manage outside money anymore.) The move to Miami, where Mr. Icahn is already living and where the office will be opened in April, could help ease Brett’s way back into the firm, though Mr. Icahn says that is not what prompted it. Brett already spends a lot of time there with his girlfriend—the model and culinary student Erin Christoff— and their dog and plans to buy a place nearer to the company’s new digs. His sister, Michelle, and her husband, who works for the firm, also plan to move to Florida with their two children. Mr. Icahn told his roughly 50 employees in a note last month that he’s moving so he can enjoy “a warmer climate and a more casual pace year-round.” Mr. Icahn, who has lived in New York since he was raised in a modest home in Queens, says he has grown tired of the city’s crowds and high taxes. He insists the move wasn’t prompted by anything more than frustration with New York, a desire to play tennis more frequently and the fact that the internet has made it possible to do his work anywhere. He has no immediate plans to sell his Manhattan penthouse, mainly because of New York’s falling real-estate prices. “New York isn’t what it was when I was young,” he says, adding that he’s given a lot to the city including a school of medicine at Mount Sinai Health System, a stadium on Randall’s Island and multiple charter schools bearing his name. Share Your Thoughts How should companies navigate the transition from a namesake founder? Join the conversation below. Most of Mr. Icahn’s longtime top lieutenants are expected to join him in Miami, though he says a handful of other staffers won’t. He is outfitting space in a modern office tower north of the city that he says isn’t really his style and will likely look like the set of “Billions,” the TV show about a fictional hedge fund. It’s close to his beachfront estate on the exclusive Indian Creek island where he and his second wife, Gail, and their three dogs are now spending more of their time. His investment fund lost 8.8% through the first half of the year, the most recent period for which results are publicly available, and has had an annualized return of 5.4% since its 2004 inception. Mr. Icahn likes to point out that the fund only accounts for a portion of Icahn Enterprises and that he heavily hedges his bets, which mutes profits. The rest of the business is a collection of companies he controls in areas like energy, food-packaging and home furnishings. Taken as a whole, Icahn Enterprises, which trades publicly, has posted returns of 1757% since its 2000 inception, including dividend reinvestments, or 15.9% annually. Nine of his activist campaigns have yielded profits of more than $1 billion. The investment fund’s largest positions include a more than $1 billion stake in Occidental, whose languishing share price Mr. Icahn has been unable to boost since it bought Anadarko Petroleum Corp. in August. He has embarked on a public campaign against Occidental CEO Vicki Hollub, who he believes pursued the deal to fend off suitors of her own. A rarely employed maneuver by Mr. Icahn to call a special meeting of Occidental shareholders to try to replace board members has stalled after he failed to get holders of 20% of the shares outstanding to join the cause. His next major opportunity to shake things up is to launch a proxy fight ahead of next year’s annual meeting. Mr. Icahn hasn’t managed outside money since 2011 and therefore doesn’t have to worry about investors getting impatient and possibly leaving, as most hedge funds do. He says that unlike many of his peers, he has the luxury of embarking on long slogs like at Xerox Holdings Corp., which he and a partner took control of after scuttling its planned merger with Fujifilm Holdings Corp. Xerox’s stock price has risen roughly 50% so far this year. “The height of a deal for me, there’s nothing like it,” he says. “I really enjoy it.” Write to Cara Lombardo at cara.lombardo@wsj.com https://www.wsj.com/articles/carl-i...k-deal-this-time-its-with-his-son-11571457602