UPDATE 3-Icahn gives up Apple buyback plan after ISS urges 'no' vote

Mon Feb 10, 2014 4:36pm EST

By Jennifer Ablan

Feb 10 (Reuters) - Billionaire activist investor Carl Icahn has backed off from his campaign urging Apple Inc to increase its stock buybacks, citing the company's recent repurchases as well as an influential proxy adviser's call against his proposal.

In a letter to Apple shareholders on Monday, Icahn wrote he was ditching his non-binding proposal to force Apple to add another $50 billion to its stock buyback plan, "especially when the company is already so close to fulfilling our requested repurchase target."

Apple shares closed up 1.8 percent higher at $528.99 on Monday.

For months Icahn had been asking Apple to boost its stock buyback program, proposing the iPhone maker repurchase another $50 billion. On Sunday, Institutional Shareholder Services Inc recommended shareholders vote against Icahn's nonbinding proposal, saying the motion would "micromanage" how the company uses capital.

Proxy advisory firm Egan-Jones has also recommended voting against Icahn's plan, which was up for a vote at Apple's Feb. 28 shareholders meeting.

Apple Chief Executive Officer Tim Cook told The Wall Street Journal last week he wanted to be "aggressive" and "opportunistic" in buying back shares. He pointed out the company had repurchased $14 billion in stock in the two weeks since reporting financial results that disappointed Wall Street.

With the latest purchases, Cook recently said Apple had bought back more than $40 billion of its shares over the past 12 months. He said it was a record for any company over a similar span.

Icahn wrote in his open letter that Apple's recent share buybacks, amongst the largest in history, have been a bit like "bailing with a leaky bucket," given the scale of its cash reserves - though they were enough to placate him.

"As Tim Cook describes them, these recent actions taken by the company to repurchase shares have been both 'opportunistic' and 'aggressive' and we are supportive," Icahn wrote.

Apple had almost $160 billion in cash at the end of 2013.

(Link to Icahn's letter)

"It looks like Icahn's crusade paid off. Apple's board and Icahn are meeting halfway," said Antony Filippo, a Toronto-based independent investment manager who does not own the stock.

"Icahn wanted to spawn change and he got a little bit of that. Apple buying $14 billion around the $500 mark is huge. They would have never done that without an activist breathing down their neck."

In late January, Icahn tweeted he had bought another half-billion dollars of Apple stock, boosting the value of stake in the company to more than $4 billion. At the time, Icahn told Reuters the decline in Apple shares presented "a great opportunity" to add to his position.

Icahn has provided a blow-by-blow account on Twitter of every new investment he has made in Apple this year as well as pleas to Apple on an aggressive buyback.

Not everyone is amused. Anne Simpson, senior portfolio manager of investments and director of corporate governance for the California Public Employees' Retirement System, which owns close to $1.6 billion in Apple shares, recently told CNBC that Icahn was engaged in "megaphone diplomacy." ()

In a statement to Reuters on Monday, Simpson said: "We welcome Icahn's move to drop his proposal. Any distribution of cash should be undertaken by a company's board after thoughtful and strategic planning, and be in the best interest of the company and all shareholders. Apple has indicated that it has a plan and has already begun distributing capital to shareholders. We believe this is a more prudent approach. We need to tend the goose that lays the golden egg."

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California state worker Albert Jagow (L) goes over his retirement options with Calpers Retirement Program Specialist JeanAnn Kirkpatrick at the Calpers regional office in Sacramento, California October 21, 2009. Calpers, the largest U.S. public pension fund, manages retirement benefits for more than 1.6 million people, with assets comparable in value to the entire GDP of Israel. The Calpers investment portfolio had a historic drop in value, going from a peak of $250 billion in the fall of 2007 to $167 billion in March 2009, a loss of about a third during that period. It is now around $200 billion. REUTERS/Max Whittaker   (UNITED STATES) - RTXPWOZ

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