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Commercial Metals rejects Icahn bid

by Lou Whiteman  |  Published December 5, 2011 at 10:35 AM
Commercial Metals Co. on Monday, Dec. 5, rejected Carl Icahn's $1.73 billion buyout offer, calling the bid "opportunistic" and arguing it undervalues the metals recycler.

Icahn last week submitted a $15 per share offer for Irving, Texas-based Commercial Metals. The investor, who hopes to blend the company with a rival metals firm he already owns, disclosed in July that his affiliates had taken a 9.98% stake in the company.

Commercial said that after consultations with advisers Goldman, Sachs & Co. and Sidley Austin LLP its board had unanimously rejected the offer, which the company argues comes at a time the metals business is depressed due to broader economic malaise. The company has begun a restructuring process independent from Icahn, in recent months existing its Croatian operations, reducing head count and exiting businesses including its heavy forms rental unit.

"The CMC board believes that Mr. Icahn's proposal substantially undervalues the Company and is an opportunistic attempt - at a time when we are at a low point in the economic and industry cycle - to transfer the future value of CMC from its stockholders to Carl Icahn," Commercial Metals lead director Anthony A. Massaro said in a statement. "Mr. Icahn also fails to take into account the substantial anticipated benefits of the strategic plan being implemented at the company."

Icahn in a Nov. 28 letter to directors announcing his offer criticized the current board, saying he does not believe the group "is capable or willing" to undertake further restructuring actions, including divesting assets and replacing management, that the investor said he believes are necessary for the company to remain competitive.

"We have no confidence in management's ability to continue running the company, nor do we have any confidence that the board will ever hold management accountable for poor performance," Icahn wrote. "Further, in our opinion, because the company has been so poorly managed, shareholders are exposed not only to cyclical industry risks, but also to permanent risks."
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Tags: Anthony A. Massaro | Carl Icahn | Commercial Metals Co. | Goldman Sachs & Co. | metals recycler | Sidley Austin LLP

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