CNBC Stock Blog

Icahn Walks Away From Commercial Metals

Antoine Gara|Deals Reporter

Carl Icahn's Icahn Enterprises has withdrawn a$1.73 billion hostile bid for Commercial Metals after less than 40 percent of the scrap metals giant's shareholders tendered their shares.

The failed tender follows a similar move made in 2011, where Icahn failed in a proxy campaign to buy Clorox after being unable to garner shareholder support.

On Monday, TheStreet highlighted that as Icahn chases $1 billion-plus sized takeover and merger attempts including truck making tie-up between large holdings Navistar International and Oshkosh Truck, his 2012 fortunes may change starting in January. The famed activist was able to return 37.4 percent in 2011.

The proxy campaign failure comes after only 23 percent of Commercial Metals shareholders tendered their holdings to Icahn or $15 a share ahead of a Jan. 10 deadline. "We did not receive 40.1 percent of the shares, and therefore, as previously disclosed, we will discontinue our proxy fight," said Icahn in a Wednesday statement.

He launched the takeover campaign in late November.

While Icahn contended that his bid would benefit shareholders suffering from a poor international expansion and an unpromising consolidation plan, Commercial Metals told shareholders that the bid was "opportunistic" and "undervalued," coming as key construction markets bottom.

Carl Icahn Drops Bid For Commercial Metals

In October, Commercial Metals announced a winding down and sale plan for a large steel mill in Croatia as it consolidates some complicated and unprofitable international operations. About management's new strategy and its confidence that a recovery was beginning for Commercial Metals' construction related earnings, Icahn wrote in a Jan. 4 letter, "This is not the Boy Scouts," meaning that the road for second chances has ended.

On news of the withdrawn proxy campaign, Commercial Metals shares fell. The company's shares fell nearly 20 percent in 2011.

Key shareholders involved in the tender offer like large institutional shareholders like Vanguard, State Street, Dimensional Funds, and Blackrock all built their 3 percent-plus stakes in Commercial Metals in 2010, and at much higher prices than Icahn. [Those holdings reflect quarterly filings with the SEC, which may have changed]. It's possible that with only 23 percent of shareholders responding to Icahn's tender, many may be taking a longer-term view on the company than Icahn, who told TheStreet in January that he was pressing for immediate change.

Analysts polled by Bloomberg prior to the proxy failure expect that Commercial Metals will return to profitability in 2012, earning $141 million in profit after reporting two successive years of $100 million-plus losses. Meanwhile, revenue is expected to grow over 6 percent to $8.4 billion in 2012.

Later in January, Icahn will face shareholders in another proxy campaign to nominate six directors to truck-maker Oshkosh's board — which he took a near 10 percent share stake in June — and subsequently recommended in a December CNBC interview that the Wisconsin-based company sell itself or pieces of its businesses to larger truck and military vehicles maker Navistar.

In his takeover attempts for Clorox and Commercial Metals, in addition to his merger calls with Oshkosh and Navistar, Icahn is departing a strategy to push for minor change at his biggest holdings, which yielded strong 2011 results. With his Clorox offer, Icahn said that other acquirers could bid much higher prices for the cleaning products giant, but none emerged. Meanwhile, in bidding for Commercial Metals, Icahn said he would combine the company's U.S. business with his PSC Metals division, expanding its $725 million in 2010 sales by a factor of nearly tenfold.

In 2011, billion dollar plus-sized minority stakes by Icahn in El Paso and Motorola Mobility netted the investment mogul impressive returns when Kinder Morgan and Google paid big premiums for the respective companies. In those investments, Icahn pushed for specific asset spins and patent sales, respectively, which eventually yielded full sales at significant premiums.

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