According to Ackman, he entered a contract with Icahn on behalf of his former fund, Gotham Partners, in March 2003 to sell to him 15% stake in Hallwood Realty Partners. Icahn paid his investors $80 per share and agreed to what he called a “schmuck insurance.” Under the agreement, Icahn would pay his investors an earn out equal to 50% of his profit in Hallwood after he received a 10% annual return if he “sold or otherwise transferred” his shares for value within three years.
In 2004, HRPT Property Trust acquired Hallwood and paid its shareholders including Icahn for their stake for $136.16 per share in cash. Ackman explained that Icahn owed $4.5 million to his investors under the terms of their agreement, but he refused to pay. According to him, he was forced to sue Icahn on behalf of his investors. He won the case, and the court found that the agreement was “clear and unambiguous.”
Icahn appealed the judgment, and the case lasted for years. In 2011, the court finally ordered Icahn to pay $4.5 million plus interest. “After Carl paid my investors, he called me up, congratulated me on winning, and said that he wanted to be my friend. I told him that I had no interest in being his friend,” according to Ackman in his press release.
Yesterday, in an interview with Trish Regan of Bloomberg TV, Icahn said that people at Wall Street know that he doesn’t like Ackman, but he pointed out their unfriendly relationship has no impact with his decision to invest in Herbalife Ltd. (NYSE:HLF).
Icahn said, “Look, it’s no secret to the world and to Wall Street – and most guys on Wall Street I sort of like and I get along with – and it’s no secret I don’t like Ackman. I have no respect for him, and I don’t like him, and that’s not a secret. But that doesn’t mean that I’m going to go in and buy stock in a company necessarily just to get him.”
Icahn also criticized Ackman’s investment style particularly his action against Herbalife Ltd. (NYSE:HLF). He said, “Frankly, I don’t like the way he did this anyway. If you’re short, you go short and hey if it goes down you make money. You don’t go out and get a roomfull of people to badmouth the company. If you want to be in that business, why don’t you go out and join the SEC?”