Billionaire Carl Icahn says he might seek control of Philip if its metals business is not sold.
Carl Icahn has increased his stake in Philip Services Corp., but says it is time for the company to dump its scrap metals business.
In a filing made yesterday to the United States Securities and Exchange Commission, Icahn discloses that he has boosted his stake to 46.7% from 42.3%, and says he might seek control of the company if its metals business is not sold.
"[We] have become increasingly concerned about the performance of Issuer's metals business, which has reinforced Registrants' belief that [Philip] should seek to dispose of its metals business," the filing states.
Companies controlled by Icahn acquired 762,000 shares of Philip for $1.9-million between July 19 and Aug. 9.
In an interview in New York, Icahn said he does not know what the right price for Philip's metal business would be. "They have had opportunities to sell it in the last few years and they should sell it and focus on their industrial services business," he told Dow Jones.
Philip's second-quarter revenue dropped to $396.1-million from $427.4-million last year. The firm attributed the drop to a $31-million slump in revenue from its Metals Services Group, which accounts for about 35% of the company's overall revenue.
Linda Kuhn, spokeswoman for Philip, said the company considered selling the scrap metals business to raise cash in 1998.
But the offers the company received were too low, especially when compared to prices Philip paid to acquire metal subsidiaries before 1997 when the business was at its peak.
The company ultimately decided to deal with its cash crisis by filing for bankruptcy protection in Canada and the United States.
The metals industry has since slumped to a 20-year low. Several North American metal producers have sought bankruptcy protection.
"We understand his concerns about performance," Ms. Kuhn said. "Our position is that we will continue to evaluate options that will create the most shareholder value. What's important in the interim is that we continue to operate these businesses and meet all of our obligations."
Mr. Icahn said in the SEC filing that he may also request increased board representation. He has two members on the nine-member board. The filing also states that Mr. Icahn might acquire more Philip shares in the open market, privately or directly from Philip. It adds that Icahn may communicate with other shareholders to discuss Philip's affairs.
Philip filed for court protection under the Companies' Creditors Arrangement Act in Canada and Chapter 11 of the United States Bankruptcy Code on June 25, 1999. Icahn acquired the bulk of his holdings in Philip through a reorganization that was completed on April 7, 2000. Financial Post