The largest shareholder of Irving, Texas-based steelmaker and steel recycler Commercial Metals Company (CMC), Carl Icahn, Chairman of the Board of Icahn Enterprises LP (IEP), issued a letter to the CMC Board of Directors Monday indicating IEP's offer to acquire CMC at $15/per share. Icahn owns 9.98 percent of CMC and said that the offer price is a 31 percent premium over CMC's closing stock price on November 25.
In the letter, Icahn was livid at the current state of CMC and its management and urged the steelmaker to present the offer to shareholders. Icahn was bullish on the prospects of the acquisition and said, "When the acquisition is completed IEP intends to combine Commercial Metals with IEP's own metals recycling assets." IEP also plans to sell CMC's non-core assets and immediately appoint a new management team to run the steel business, if the acquisition is approved. Icahn also explained that "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 non-core assets, the immediate replacement of management, and the refocusing of the business on core operations in North America...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 called CMC's record in investments "dismal," and said despite the extremely unfavorable record, "the Board recently granted bonuses to management, including a $750,000 bonus to the new CEO--for what exactly?! Not in recognition of the Company's operating performance, but because management threw in the towel and admitted that the Company should walk away from many of the substantial investments that you approved only a few years earlier. The logic is absurd! The Company spends shareholder money on disastrous investments, and then several years later, awards management special bonuses - again shareholder money - for having the ‘courage' to run away from those very same investments!"
CMC rapidly responded to the letter Monday and said that it will review the "unsolicited letter" and determine the best response, and also explained that Icahn's letter did not "constitute a formal offer and, as such, stockholders do not need to take any action."
CMC also noted that "In a highly cyclical industry, it continues to make significant progress on many key fronts to enhance performance and position Commercial Metals Company for future success, showing improved financial results in fiscal 2011."