Icahn sues Motorola for access to documents

NEW YORK (Reuters) - Activist investor Carl Icahn said on Monday he is suing Motorola Inc to force it to hand over documents related to its money-losing mobile devices business to determine if its board failed in its duties.

The actions come after Icahn rejected an offer by Motorola to support two of his four board nominees, according to the Wall Street Journal Online, which cited an Icahn interview.

Icahn, Motorola's second-biggest shareholder, is engaged in a proxy battle with the company, proposing a slate of four directors to the board of the No. 3 phone maker, which has seen its market share plummet in the last year.

Motorola said it rejected Icahn's request for "extensive access" to its books, but said it offered the investor access to information about the company under a confidentiality agreement, but Icahn had declined the offer.

The mobile phone maker said earlier this year it is looking at its options, including a separation of its mobile devices business, after pressure from Icahn for such a move.

The Icahn Group said it filed a lawsuit in Delaware Chancery Court on Monday, seeking documents on Motorola's mobile devices business, including details on board discussions about the potential spinoff and the unit's performance.

"We demanded these materials for the purposes of enabling us to investigate whether and to what extent the board of directors of Motorola failed in their duties as directors," Icahn said in a letter to Motorola shareholders.

Icahn also asked for documents, if any, showing the use of Motorola's aircraft and property by senior management, the board of directors and their families. Icahn holds about 6.3 percent of Motorola, according to March 5 data.

He also questioned whether Greg Brown, recently appointed as chief executive, was qualified to do the job after more than a year of missteps by his predecessors.

In an e-mailed statement Motorola said Icahn had not laid out "a proper purpose" to give him inspection rights of its books under Delaware law.

COMPROMISES REJECTED

Motorola also accused Icahn, who has promised to share any information he receives with other stockholders, of seeking "to create further unnecessary distraction," as it had offered confidential access to its data.

Icahn declined Motorola's offer to support two of his director nominees, according to the Journal, which said the company would not support one of the candidates, Keith Meister, who manages Icahn's $8 billion fund Icahn Partners L.P.

Icahn was not immediately available to comment on the story and Motorola, which had previously urged shareholders to support its director slate instead of Icahn's candidates, declined comment.

Icahn said he wanted to "ascertain what the board could have done in the exercise of its fiduciary duty to assure Motorola stockholders that Motorola's statements and predictions were not incorrect."

Motorola shares closed up nearly 5 percent at $9.69 in on the New York Stock Exchange. Its shares have lost 63 percent of their value since mid-October 2006, when investors started to become disillusioned with its results.

Icahn said in the complaint filed in Delaware that he and his affiliates had spent more than $2 billion for over 144 million Motorola shares, implying a loss in value of about 30 percent for the investment.

SHAREHOLDER SYMPATHY?

Motorola, which has said it faces a challenging 2008, has been losing to rivals such as industry leader Nokia and No. 2-ranked Samsung Electronics Co Ltd in the last year amid criticism of its cell phone line-up and failure to produce a strong successor to the once-lauded Razr phone.

Charter Equity Research analyst Ed Snyder said Icahn, who failed to win a Motorola board seat last year, was likely looking for information that would help him win shareholder support ahead of the annual meeting, set for May 5.

"He's trying to wrest control of the company because he thinks his slate can do a better job than the current board, which is not a high bar," said Snyder, who expects shareholders to be more open to Icahn at this year's director election.

Motorola has also reshuffled its top management, recently appointing a new chief executive and chief financial officer.

Icahn accused the company's board and its management team, previously led by Ed Zander who stepped down as CEO in January, of failing to assess the business properly in the last year.

He also questioned whether Zander's replacement, Brown, was qualified to lead the company.

"He certainly -- as far as I can ascertain -- has no in- depth experience or knowledge concerning the mobile devices business, which was and is by far the major problem for Motorola," Icahn wrote in the letter to shareholders.

Along with Meister, Icahn's director slate includes Frank Biondi, who had helped Icahn in a previous proxy battle, William Hambrecht and Lionel Kimerling.

(Editing by Tim Dobbyn/Andre Grenon)