It was the elevator ridethat many a CEO has come to dread. On the evening of June 18, 2014, Howard Levine, the CEO of Family Dollar Stores, arrived for his meeting at the sumptuous Museum Tower residence in Midtown Manhattan. A white-gloved lift operator hit the button to take him to the penthouse apartment on the 51st floor. Waiting for him was Carl Icahn.
Twelve days earlier, Icahn, the powerful activist investor and founder of Icahn Enterprises, had announced that he’d bought 9.4% of Family Dollar’s shares. That same day the 79-year-old multibillionaire called Levine at Family Dollar’s modest headquarters outside Charlotte and invited him to fly up for dinner. Like so many corporate chiefs before him—from Apple’s Tim Cook to former Chesapeake Energy CEO Aubrey McClendon to Greg Brown of Motorola Solutions—Levine was being summoned for the ultimate activist experience, a ritual in which the dean of Wall Street dealmakers plays the gracious host to the target of his latest campaign while dictating exactly how things are going to go down. Levine knew he couldn’t say no.
When Levine, 56, stepped out of the elevator into Icahn’s 11,000-square-foot duplex, he and fellow Family Dollar board member George Mahoney were escorted by a butler to the expansive balcony. There they found Icahn mixing a batch of martinis—Ketel One vodka, up with a lemon twist—for himself and two lieutenants. “Can I get you a drink?” Icahn asked Levine. “I’d love one,” replied Levine, “but I’ll say no, since I want to keep my wits about me.” Icahn didn’t miss a beat. “Not drinking isn’t going to help you,” he fired back, “so you might as well drink.” Levine decided to stay sober anyway.
Over a dinner of lamb chops, Icahn told Levine he should sell the struggling Family Dollar business, which Levine and his family had run for 55 years, to its bigger, better-run rival, Dollar General (DG). If he played his cards right, Icahn suggested, he might even get a bidding war going. “Carl said he’d broker the deal, that he was the one to get the best price,” Levine recalls. Levine argued that trying to sell to Dollar General was futile. He maintained that he had great plans for reviving his own company. When Levine blamed a Family Dollar problem on another, recently departed executive, Icahn cut him off.
“Stop making excuses!” the blunt, Queens-born billionaire replied. “Tell it to your mother.” Levine couldn’t help laughing. He’d heard all about Icahn’s cocktail for confronting CEOs: jiggers of brute force mixed with splashes of high comedy.
There are few bigger stories in corporate America than the rise of activist investors in recent years. The dinner attested to the immense clout wielded by Icahn and a handful of billionaire activists. And the ceremony drove home the new, undeniable reality for Levine: Whether he liked it or not, his company was now in play, and he would have to scramble to influence events.
Other activist billionaires were already circling, squaring off in what became an epic, 18-month war—one that has only recently drawn to a close. As Fortune went to press in late April, the smaller Dollar Tree (DLTR) chain was close to completing a $9.1 billion acquisition of Family Dollar. To make the deal happen, the two discount retailers had to fend off a no-holds-barred, last-minute assault from Dollar General and contend with a host of the most demanding investors—and biggest egos—on Wall Street.
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This extended version of this story is from the May 1, 2015 issue of Fortune magazine.
