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Icahn could extend Commercial Metals offer

by Lou Whiteman | Published January 6, 2012 at 11:00 AM

Financier Carl Icahn on Friday, Jan. 6, pledged to extend his unsolicited $1.7 billion offer for Commercial Metals Co. if at least 40.1% of shares are tendered for the offer, allowing the company time to solicit better offers and threatening to take it to court should it not hold a sale process.

Icahn put Irving, Texas-based Commercial Metals in play in late November, offering $15 per share for the company. The billionaire investor, who owns about 10% of the company's shares, threatened late last month to drop his proxy battle if 40.1% of the metal recycler's shares are not tendered to his offer.

Commercial Metal, in consultation with advisers Goldman, Sachs & Co. and Sidley Austin LLP, has rejected the bid as undervaluing the company, but Icahn in a letter to shareholders filed with the Securities and Exchange Commission said that he does not believe the company is worth $15 per share with its current management, calling Commercial Metal's performance "egregious."

The company has posted losses in two of the last three years, but has begun a restructuring process independent of Icahn that includes shedding its Croatian operations and other non-core businesses and reducing its head count. Icahn if successful is expected to combine PSC Metals Inc., which he has owned since 2007, with Commercial Metals' domestic recycling business and sell its other assets.

Icahn said that if more than 40% of shares are tendered, giving him at least 50% control, he would extend the offer to allow Commercial Metals to "conduct a fair sale process" with the $15 per share offer serving as a floor. Such a move would avoid a proxy fight, but Icahn said that if the board does not agree to a sale process he would continue the proxy fight "and go to court in Delaware to fight for the ability to close the tender offer."

Should he not receive tenders for at least 40.1% by the current Jan. 10 deadline, Icahn reiterated he would withdraw his proxy fight "so we can be free to do as we like with our investment."

The activist investor has a mixed track record of late. Icahn withdrew a similar offer to acquire Clorox Co. after the bid was rejected by the company and no higher bid emerged, and earlier this year brokered a peaceful exit from Lions Gate Entertainment Corp. after a costly battle over the future of that entertainment studio.

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