Icahn Makes Play to Acquire CMC

Carl Icahn, through his Icahn Enterprises LP (IEP) master limited partnership, has made a bid to acquire the steel and recycling company Commercial Metals Co. (CMC) for $15 per share, or approximately $1.73 billion. Icahn presently is CMC’s largest shareholder, owning slightly less than 10 percent of the company’s stock.

Icahn, through IEP, owns the scrap metal recycling firm PSC Metals.

In a letter sent to CMC’s board Nov. 28, 2011, Icahn says the reason IEP is offering a 31 percent premium over CMC’s Nov. 25 closing price is because of IEP’s PSC ownership. Icahn says IEP will combine PSC with CMC’s recycling assets, while selling off CMC’s noncore assets. IEP will immediately appoint a new management team to run the steel business, according to Icahn.

He writes, “We do not believe the current board is capable or willing to undertake the actions necessary to enable Commercial Metals to compete in the future. Such actions include, but are not limited to, the sale of noncore assets, the immediate replacement of management and the refocusing of the business on core operations in North America.

“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.”

Icahn also states in the letter that IEP is prepared to proceed to immediately negotiate and execute definitive documents.