This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Carl Icahn's Billion Dollar Problem

NEW YORK (TheStreet) - Though activist investor Carl Icahn launched a new buyout arrow Monday, bidding $1.73 billion or $15 a share for Commercial Metals (CMC) and lifting the company's shares over 22%, investors should consider his billion dollar problem with company takeovers.

Four out of Icahn Enterprise's biggest five takeovers deals since 2005, each over $1 billion, have failed or collapsed, according to data compiled by Bloomberg. Those deals, including Clorox (CLX), Reckson Associates, Dynegy (DYN) and Lear (LEA) signal that Icahn may overextending himself in billion dollar sized takeovers.

Carl Icahn

In a hostile letter to company management, Icahn said he will bid on Commercial Metals at a 31% premium to bolster his existing 10% stake in the company and a majority-owned PSC Metals investment. The question is whether, like previous attempts to convert a large minority stake in companies such as Clorox, Lions Gate Films (LGF) and Dynegy, Icahn will fail at an over $1 billion takeover attempt. Those recent deals signal that Icahn is more effective in agitating company sales using minority stakes, not in being an outright buyer.

Monday's takeover announcement in a loss making company with an ineffective business mix may also prove to be an unnecessary challenge. "The track record established by the current Board and management team over the last several years is dismal. Unfortunately, a below average operating performance fueled by a distracting and misguided international growth plan, combined with a disastrous investment record, has become the defining characteristic of Commercial Metals," wrote Icahn a letter to Commercial Metals' board.

The Commercial Metals bid most closely resembles Icahn's recent $12.6 billion bid for Clorox where he tried to convert a large minority stake using hostilely appointed directors. As Clorox's largest shareholder with an over $5 billion investment, Icahn tried to appoint a slate of directors to replace existing directors, adding to chances that his takeover bid would be accepted.

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,880.36 -31.75 -0.19%
S&P 500 1,970.07 +0.12 0.01%
NASDAQ 4,462.9020 +20.2040 0.45%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs