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.
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.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
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.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
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.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV