BOSTON (TheStreet) -- Carl Icahn's bid to acquire Commercial Metals (CMC) - Get Report has sparked a 20% rally in the stock Monday, although the billionaire investor's offer shouldn't come as a shock to the market.
Icahn has offered $15 per share to acquire Commercial Metals, a steel and metal manufacturing and recycling company, a 31% premium to the stock's closing price on Friday. Icahn, in calling the company "poorly managed," says he plans to sell Commercial Metals' non-core assets and immediately appoint a new management team to run the steel business.
"In our opinion, these undertakings are imperative to realize future profits at Commercial Metals," Icahn wrote in a letter to Commercial Metals' board.
In typical Icahn style, the billionaire investor blasted Commercial Metals' board, arguing that the company "squandered $2 billion of capital on ill-conceived acquisitions and 'growth' projects" even as the board granted a $750,000 bonus to its new CEO.
"Unfortunately, over the next several years, even if the steel markets shift into a cyclical recovery, we fear, and believe, that Commercial Metals will simply shift back from the current strategy where management is supposedly focused on unwinding its disastrous investments, to the previous 'strategy,' where management travels the world investing in losing 'growth' projects from Croatia to Australia," Icahn added.
Commercial Metals has seen all the classic signs of an Icahn takeover brewing for months. In October, Icahn launched a proxy battle -- one of his signature moves -- to install three of his own nominees to Commercial Metals' board of directors. Icahn also moved to have the company end its poison pill plan.
Icahn's stake in the company was another indication he would consider an offer. Icahn is the largest holder of Commercial Metals stock, with more than 9 million shares as of Sept. 30. By comparison,
is second, with a little more than 5 million shares. Icahn's position in Commercial Metals is about 10% of the shares outstanding but represents less than 1% of Icahn's reported portfolio.
Commercial Metals' management likely knew the proxy battle with Icahn would get hotter. Over the weekend, the company filed its preliminary proxy statement, asking shareholders to support its nominees to the board of directors.
"We have a strong and independent board, comprised of highly experienced professionals with expertise across a wide range of disciplines," CEO Joe Alvarado said in a statement.
Investors in Commercial Metals will be happy to see the stock up more than 20% to $13.87 at the opening bell Monday, but they should be wary of Icahn's offer as his recent track record of acquisitions has been abysmal.
In July, Icahn offered nearly $13 billion to acquire
, but the deal ultimately fell apart and shares of the household-products company are down more than 6% since his first offer. Similarly, after Icahn made $17-per-share bid for
in March, the stock has dropped more than 17% to $12.39
-- Written by Robert Holmes in Boston
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