Bloomberg News

Icahn Asks Commercial Metals Investors to Back Takeover Bid

December 06, 2011

(Updates with comment from analyst in the eighth paragraph.)

Dec. 6 (Bloomberg) -- Billionaire investor Carl Icahn is planning a tender offer for all of Commercial Metals Co.’s outstanding shares for $15 apiece after the board rejected his all-cash bid for the company.

The offer needs the support of at least 40.1 percent of shareholders to succeed, which would give Icahn a majority when combined with his current stake of about 10 percent, New York- based Icahn Enterprises LP said in a statement today.

“After attempting to work with the Board, we are launching this tender offer so that shareholders can decide for themselves what they wish to do with their company,” Icahn said in the statement. Icahn asked the board to lift a restriction that limits his holding to 10 percent. Icahn said he would go to court if the board failed to do so.

Icahn said he would sell “non-core” assets, appoint new management and combine Commercial Metals with his existing metals-recycling assets. Commercial Metals, based in Irving, Texas, has said it plans to close or sell a mill in Croatia, shut rebar-fabrication plants and reduce its global workforce.

Icahn Enterprises offered to buy Commercial Metals in a Nov. 28 letter to the company’s directors.

Takeover Proposal

The takeover proposal is 31 percent more than the stock’s closing price on Nov. 25, the last trading day before the bid was announced. Commercial Metals, which collects scrap that it melts to make products such as steel rebar used in construction, said yesterday that Icahn’s $1.73 billion bid was “opportunistic.” The value of the transaction was calculated based on the 115.5 million shares that are outstanding, according to Bloomberg data.

The 75-year-old Icahn made millions in the 1980s pressuring companies from USX Corp. to Texaco Inc. to split up or increase dividends and buybacks. Clorox Co., software-producer Mentor Graphics Corp. and pharmaceutical-maker Mylan Inc. are among companies that have had offers from Icahn subsequently withdrawn.

Icahn’s intention to buy Commercial Metals appears genuine, Kuni Chen, an analyst with CRT Capital Group said in a research note today. Commercial Metals may be worth up to $25 a share if its parts are sold separately, said Chen, who has a “buy” rating on the company

“In our view, the tender offer has a very good chance of receiving strong shareholder support,” Chen said in the note.

Commercial Metals, which also distributes steel, has operations in the U.S., Poland and Croatia. The company rose 4.3 percent to close at $14.69 in New York.

Icahn disclosed in July that he bought almost 10 percent of Commercial Metals. The company then adopted a shareholder rights plan to cap ownership at 10 percent and prevent hostile takeover attempts.

Commercial Metals is being advised by Goldman Sachs Group Inc. and law firm Sidley Austin LLP.

--Editors: Jasmina Kelemen, Charles Siler

To contact the reporter on this story: Sonja Elmquist in New York at selmquist1@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net


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