CMC Board Rejects Icahn’s Offer

The board of Irving, Texas-based Commercial Metals Co. has rejected the unsolicited buyout offer from its largest shareholder Carl Icahn and his company Icahn Enterprises L.P. In late November, Icahn sent a letter proposing the acquisition of CMC for $15 per share.

"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," says CMC Lead Director Anthony A. Massaro. "It's important that our stockholders understand that Mr. Icahn is making an aggressive push to acquire the company at this time in an attempt to achieve a bargain basement price for CMC."

“Mr. Icahn also fails to take into account the substantial anticipated benefits of the strategic plan being implemented at the company. Led by our new CEO, Joe Alvarado, and our new CFO, Barbara Smith—both highly experienced industry veterans who assumed these positions just earlier this year—CMC has taken meaningful steps to improve long-term financial and operational performance. The board firmly believes that the continued pursuit of our strategy will deliver greater value for our stockholders than Mr. Icahn's proposal,” Massaro says.

In Icahn’s letter to CMC, he noted his offer was a 31 percent premium over the stock’s closing price on Nov. 25, and a 72.6 percent premium on its 2011 low of $8.60. He said the premium was the result of his company’s existing ownership of PSC Metals, which he would combine with Commercial Metals’ recycling assets and then sell CMC’s non-core assets. He would also appoint a new management team to run the steel business.

“As a 10 percent shareholder of Commercial Metals, we are extremely concerned about the capabilities and behavior of the current board and management and, therefore, we intend to nominate three individuals as directors at the company’s 2012 annual meeting of shareholders, as well as make several proposals for shareholder consideration. 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,” Icahn wrote to CMC.

His proposal did not constitute a formal tender offer to stockholders. Thus, CMC’s directors say, the stockholders did not need to take any action.

In response, Icahn announced he would make a tender offer to buy Commercial Metals at $15 per share. "It is disappointing that this board and management team rejected our all-cash offer to buy Commercial Metals at $15 per share. Our tender offer will be directed to shareholders and will require shareholder action. After attempting to work with the board, we are launching this tender offer so that shareholders can decide for themselves what they wish to do with their company."