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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 - Get Report) 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 - Get Report), Reckson Associates, Dynegy (DYN - Get Report) and Lear (LEA - Get Report) 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 - Get Report) 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.

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DYN $32.32 0.00%
CMC $15.61 0.00%
CLX $109.26 0.00%
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