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January 11, 2012 7:54 pm
Carl Icahn has dropped his hostile bid for Commercial Metals, the US steel company, after shareholders chose not to back his $1.7bn offer in another blow for the activist investor.
Only 23 per cent of Commercial Metals’ investors chose to tender their shares, after Mr Icahn said in December that he would take his $15 a share offer direct to investors.
“We did not receive 40.1 per cent of the shares, and therefore, as previously disclosed, we will discontinue our proxy fight,” said Mr Icahn yesterday. He already owns just less than 10 per cent of Commercial Metals.
He needed to gain control of the company and had pledged to challenge Commercial Metals’ “poison pill” defence in court if successful. Mr Icahn had already promised to walk away from the offer, rather than extending his campaign, should shareholders fail to back him.
The board of Commercial Metals had repeatedly dismissed Mr Ichan’s offer as “opportunistic” and “self-serving”, arguing that pursuing the company’s standalone strategy would create more value than offered by the activist.
Shares in Commercial Metals fell 6.23 per cent in morning trading in New York to $13.84. Commercial Metals was advised by Goldman Sachs and Moelis & Company.
The withdrawal is another defeat for Mr Icahn who last year pulled out of a $13bn bid for Clorox, the US household products company. He launched his hostile offer last summer, while claiming that he believed a global consumer company such as Procter & Gamble, Unilever or Colgate-Palmolive would step in to buy Clorox.
Similar to the Clorox situation, industry advisers had questioned Mr Icahn’s interest in owning CMC, despite the activist’s purported plan to combine the company with his existing scrap metals business, PSC Metals.
Commercial Metal’s diverse business, which spans five different markets from scrap metal to steel mills in Poland and Croatia, was also seen as deterring other potential buyers.
Mr Icahn lost out last year in his attempt to replace board directors at Forest Laboratories. Shareholders elected all 10 of the drugmaker’s nominees, rather than backing those proposed by Mr Icahn.
Activist campaigns against targets worth more than $1bn increased sharply last year. Proxy fights to place candidates chosen by a disgruntled investor on to boards also rose sharply.
However, defence advisers argue that fewer activist campaigns are developing into full proxy fights as companies become more sophisticated in dealing with disgruntled investors, engaging in discussions earlier or offering cost cuts or other concessions to keep long-term investors on board.
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