Tag Archives: Icahn Enterprises

Business, Finance, Occupation & Industry

Dell Tries to Pacify a Hungry Icahn

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By Michael Lewis, The Motley Fool

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Dell has offered its three suitors millions to cover bid expenses, but with caveats. For activist investor Carl Icahn, who is the last suitor and holds the highest bid of more than $15.60 per share, this means he has to be very un-Carl Icahn-like in his proposal. Clearly, the Dell special committee wants this process to go down smoothly, without proxy battles and costly litigation. Where are we with the Dell takeover, and should investors believe Icahn’s estimate that comes in north of $20 per share for the company?

Three houses
As has been widely reported by now, the Dell sale has attracted three bids in its “go shop” period, which concluded at the end of last month. The first player is founder and current CEO Michael Dell, who has partnered with private-equity firm Silver Lake Partners to offer $13.65 per share — valuing the company at $24.4 billion. The stock trades over $14 today.

The second suitor is private-equity group Blackstone. As mentioned in a prior article, Blackstone stepped into the ring with an interesting card — former Hewlett-Packard executive Mark Hurd. The firm believes Hurd, not Dell (the human), could bring Dell (the company) back to relevance as he did with his former employer. Blackstone’s offer came in higher than Michael Dell‘s at $14.25 per share.

The third and final suitor, as mentioned, is Icahn and his holding company, Icahn Enterprises . As usual, Icahn is the wild card in the bunch, vowing to take the company on via proxy fights and lawsuits if he doesn’t get what he wants. Icahn Enterprises currently owns roughly 100 million shares — or more than $1.4 billion worth of Dell stock. He also leads the pack with a bid of $15.65 per share. Before his bid, the investor publicly expressed his opinion that the company is worth more than $22 per share.

What’s a special committee to do?

Pay for play
Dell’s committee is paying all three parties millions of dollars to cover their due diligence — which may seem a little odd, but it sounds to me like they just don’t want to beleaguer the issue. It’s apparently a very peaceful, generous committee.

For Carl Icahn and Icahn Enterprises, the gift package comes in at $25 million. This good gesture came with a note, and one that I can’t imagine reads well on Icahn’s desk.

Specifically, the committee chastised Icahn as having “threatened the Company’s directors with ‘years of litigation’ and a proxy fight if they do not conduct the transaction process in the manner” he prefers. Basically, if Carl Icahn acts like Carl Icahn during this process, he will not be gifted the $25 million, and the committee will be very upset.

Sounds like cannon fodder for the king of corporate raiding.

The word
Looking at the market price, which hovers above Michael Dell‘s offer and below those of the other two, investors and analysts seem to …read more

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Does Icahn Enterprises Need an Activist?

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By Michael Lewis, The Motley Fool

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Carl Icahn is the first of the activist investors — formerly known as “corporate raiders.” Long before Ackman and Einhorn, Icahn was a robber baron of the corporate world circa 1985. At 77 years old, the investor hasn’t pumped the brakes one bit, recently taking high-profile positions in companies such as Netflix and Herbalife . Though his reputation ranges from exalted to despised, his recent picks have proved profitable plays for investors who followed suit. Recently, one thing is a mystery: his own public company. Despite Icahn‘s investing successes, Icahn Enterprises has been a poor performer as of late. Let’s take a closer look to see whether the market‘s abandonment of the stock is warranted.

Recent performance
Icahn Enterprises is a near $6 billion holding company owned almost entirely by Carl Icahn (no surprise there). Since 2010, revenue has nearly doubled to $15.7 billion, while the bottom line in the most recent year was just shy of $380 million. The company has nearly $4.5 billion in cash and equivalents, as well as an easily manageable debt load. This year the company tripled its dividend to $4 per share — a 7.3% yield.

IEP subsidiaries include everybody’s favorite orange juice, Tropicana, and American Railcar Industries . Icahn’s recent bid for Dell is backed by IEP, as well as the company’s position in aforementioned Herbalife and Netflix. Objectively, the conglomerate owns a solid portfolio of companies and maintains minority positions in public entities that, with the exception of Herbalife, have performed well.

With many fundamental indicators suggesting that IEP is a stable, cash-generating business and recent wins in equity markets, why has the stock tumbled from its mid-February high of nearly $90 per share to today’s $55?

What happened?
For context, let’s look at some of Icahn’s stock holdings. Netflix earned $0.13 per share last quarter versus a market estimate of a $0.12 loss. Icahn owns 4.8 million shares, or nearly 9% of the company. In just three months, the value of those shares has gone from $441 million to more than $848 million — nearly 15% of Icahn Enterprises‘ current market cap. American Railcar Industries‘ stock has risen 53% in the last six months, boosting Icahn’s stake by millions.

One possible culprit was the company’s follow-on offering in early March, which came out priced at $63 per share. Investors may also be nervous regarding the company’s large position in Dell and Herbalife — two stocks that strongly polarize sentiment.

So what’s an investor to do?

The call
Icahn Enterprises‘ dividend yield has been erratic over the years, and I am not sure its current 7% yield is long for this world. As mentioned, the company is almost entirely owned by Icahn himself. While big insider ownership is a plus in many situations, this particular situation makes for limited liquidity and the risk that Icahn will take actions for himself, rather than shareholders.

The current valuation is compelling, and Icahn’s investments have certainly been on …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

The 3 Best-Performing Nasdaq-100 Stocks in the First Quarter

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By Sean Williams, The Motley Fool

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It was generally a great quarter for U.S. indexes all the way around, with the Dow Jones Industrial Average and S&P 500 all rising to the occasion and eclipsing their all-time highs. The same can’t quite be said for the tech-heavy Nasdaq-100, which rose just 5.9% during the quarter. Don’t get me wrong — this is still an impressive gain. However, the continued commoditization of technology products dragged down results for numerous technology bellwethers.

Despite underperforming both the Dow Jones and S&P 500, three companies shone to the upside during the quarter.

Micron Technology +57.3%
Memory-chip maker Micron sneaked in as the fifth-best performer in the S&P 500, but it snagged the title as top dog within the Nasdaq-100 thanks to the beautiful combination of decreasing production costs and rising gross margins. Micron’s second-quarter results highlighted this outperformance, as its revenue flew by Wall Street’s estimates by $160 million despite a worse-than-expected loss of $0.28 per share. 

Celgene +47.7%
Biotechnology company Celgene delivered an exceptional quarter for investors, rising nearly 48% after outlining a plan in early January at the J.P. Morgan Healthcare Conference that could have it doubling its revenue and tripling its profits organically by 2017. Celgene has multiple growth drivers in Revlimed for multiple myeloma and Abraxane, which continues to gain additional approvals in various cancer treatments. In addition, Celgene received FDA approval for its advanced multiple myeloma drug Pomalyst during the first quarter.

Dell +42.2%
PC-maker Dell’s gains come courtesy of a buyout offer to go private from CEO Michael Dell and Silver Lake Partners, which offered $13.65 per share for the company in February. After weeks of huffing and puffing from activist investors unhappy with the buyout price, Blackstone Group and Icahn Enterprises one week ago offered competing bids that could take all, or parts, of the company private for a value ranging from at least $14.25 for Blackstone, to as high as $15 for Icahn Enterprises bid. As a shareholder in Dell, I encourage you to read my more detailed analysis of the three-way battle for this transformative company, and why the Blackstone offer is a superior bid. 

Which company has the best shot of outperforming in Q2?
I’m a current shareholder in Dell, but I’m also a realist who understands that the chance that any competing bids will send shares higher is pretty low. With its PC business in decline and its networking business showing double-digit gains, cash flow growth from here on out should remain a wash. That will make raising additional cash beyond the current offers difficult, which leads me to believe Dell will be fairly flat in the upcoming quarter.

Micron Technology, as well, isn’t a company I’d expect much from in the upcoming quarter. Memory-chip makers are the type of company you buy when no one wants them and you sell when the Wall Street upgrades start rolling in. With gross margin expanding …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Dell Shareholders Should Take This Deal

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By Sean Williams, The Motley Fool

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I’ve always said investing takes a blend of skill and luck. Luck definitely shone in my favor in November when I picked up shares of PC-maker Dell the day after it reported third-quarter results that had Wall Street running for the hills.

In that report, investors saw a company that was in the midst of a very long transformation that was going to struggle with declining PC-sales as it pushed into information technology. What I saw was a company capable of producing billions in annual cash flow that already boasted a large net cash position, and that could be a potential takeover target. Little did I know how lucky I would be, because a few months later that takeover chatter would become a reality.

Three’s company
The initial deal offered by Silver Lake Partners for $13.65 per share didn’t sit too well with Dell’s largest shareholders — Southeastern Asset Management and T. Rowe Price Group , which together own 12.9% of all outstanding shares — and prompted activist investor Carl Icahn to make a sizable investment that led to the confidential opening of Dell’s books. Large shareholders criticized the deal for valuing Dell too cheaply with Icahn originally demanding Dell go into debt to pay out a $9 special dividend if the deal fell through. That all changed on Friday.

With three bids effectively on the table now — $13.65 from Silver Lake Partners, a minimum $14.25 per share offer from Blackstone Group , and an offer from Carl Icahn and Icahn Enterprises to purchase 58% of outstanding shares at $15 — things are about to get interesting. When all is said and done, one deal stands out to me, a Dell shareholder, as a clear winner.

Why the Silver Lake deal is yesterday’s news
The Silver Lake deal is essentially dead after these two competing bids emerged on Friday. Unless Silver Lake wishes to boost its bid — which could be more difficult now that Dell lowered its fiscal profit down to $3 billion for the year — or Michael Dell wants to dig more deeply into his own pockets (which seems very unlikely given that he was already utilizing his 16% stake in the company to finance the deal), then it’s as good as dead.

I think Icahn? Actually, I think not…
Carl Icahn‘s deal is intriguing from a shareholder perspective as it, on paper, appears to net the highest dollar amount per share, although we don’t yet know how high the Blackstone Group bid is willing to go. However, Carl Icahn‘s bid will only be for 58% of the company, exposing the remaining 42% to the public effects of a reduced earnings forecast and a discerning public eye that has been displeased with the pace of Dell’s turnaround.

This is the deal that makes sense
As a Dell shareholder, the Blackstone offer makes the most sense of all — and I feel …read more
Source: FULL ARTICLE at DailyFinance