Commercial Metals Co. rejected an unsolicited takeover bid from billionaire investor Carl Icahn, saying the offer that values the steelmaker at $1.73 billion is too low.
The bid “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,” Anthony Massaro, a Commercial Metals director, said today in a statement. The Irving, Texas-based company was responding after Icahn’s company said it would “take matters into our own hands” on Dec. 2 should CMC not respond by today.
Icahn Enterprises LP, which owns a 10 percent stake in CMC, offered $15 apiece for the rest of the shares without any financing or due diligence conditions, Icahn said in a Nov. 28 letter to Commercial Metals directors. The takeover proposal is 31 percent more than the stock’s closing price on Nov. 25, the last trading day before the bid was announced.
In a letter to Icahn distributed with CMC’s statement, the company said the offer was a “significant discount” to Commercial Metals’ 52-week high of $18.09. The company also said that Chief Executive Officer Joe Alvarado and Chief Financial Officer Barbara Smith both joined the company this year and have since “taken important steps to strengthen CMC’s operations.”
CMC said it plans to close or sell a mill in Croatia, shut rebar-fabrication plants and reduce its global workforce.
Commercial Metals collects scrap that it melts to make products such as steel rebar used in construction. The company, which also distributes steel, has operations in the U.S., Poland and Croatia. Icahn said he would sell “non-core” assets, appoint new management and combine Commercial Metals with his existing metals-recycling assets.
Icahn plans to nominate three board members at CMC’s next annual shareholder meeting on Feb. 3, challenging Alvarado’s position on the board. Icahn, 75, who often buys distressed companies, started his metals business through the acquisition of Philip Services Corp., a bankrupt Canadian scrap metals and industrial services company, in 2004.
Commercial Metals said on Nov. 28, and reiterated today, that Icahn’s initial letter proposing the takeover didn’t “constitute a formal offer” and shareholders don’t need to take any action.
Icahn had responded on Nov. 28 in a second statement that his bid is “in all respects and without any doubt, a formal all-cash offer to acquire the company.”
Commercial Metals rose 0.7 percent to $14.09 at the close in New York. The shares have gained 23 percent since Icahn’s bid was announced.
Icahn Capital LP, the financier’s hedge fund, disclosed in July that it paid almost $101 million to acquire a 10 percent stake comprised of shares and options in Commercial Metals.
The value of the CMC deal is calculated based on the 115.5 million shares that are outstanding according to Bloomberg data.
Commercial Metals is being advised by Goldman Sachs Group Inc. and law firm Sidley Austin LLP.