Carl Icahn said Monday that he wants to buy Commercial Metals Co. for about $1.73 billion and combine parts of it with metals recycling businesses that he already owns.
The billionaire investor, who already owns almost 10 percent of Commercial Metals, said he also plans to nominate three of his associates to be directors on its board.
Icahn's offer of $15 per share represents a 31 percent premium over the scrap metal processor's closing stock price on Friday. Commercial Metals shares jumped $2.61, or 23 percent, to $14.06 in midday trading Monday.
Commercial Metals, based in Irving, Texas, manufactures, recycles and markets steel and metal products, among other materials. Its stock has taken a beating, losing about 31 percent of their value since the beginning of this year and about 70 percent since the early months of the Great Recession in 2008.
Icahn, who owns PSC Metals Inc., said he wants to combine Commercial Metals with his existing metals recycling businesses and sell off the rest of its assets, refocusing on its core North American operations. A new management team would be appointed immediately.
Icahn is known for buying and shaking up struggling companies, with mixed success.
He amassed his 9.98 percent stake in Commercial Metals this past summer after first buying up the stock August 2010. Days after his stake was revealed, the company adopted a so-called poison pill defense that would be triggered whenever any hostile acquirer gets a stake in the company exceeding 10 percent.
Icahn said the deal would not need financing and that his company is ready to meet, begin negotiations and launch a tender offer for Commercial Metals shares as soon as possible.
Commercial Metals said in a statement Monday that it would review Icahn's overture and decide what response would be in the best interests of the company and its shareholders. It also noted that that what Icahn has presented falls short of a formal offer and said its shareholders need take no immediate action.
Citi analyst Brian Yu said Icahn's offer could end up looking like a bargain once the still sluggish construction industry, which accounts for more than 90 percent of the company's business, finally rebounds.
"Timing is everything and while the offer might be fair today, it undervalues Commercial Metals longer term, in our view,"
Last month, the company said it posted a loss of $120.3 billion in its fiscal fourth-quarter, pulled down by hefty restructuring charges mainly stemming from a decision to shut down some of its overseas operations. Excluding those and other charges, it earned $19.1 million for the quarter ended Aug. 31.
Icahn called the current board's track record "dismal" and said he doesn't think it will do what's needed for the company to compete, such as selling businesses and replacing management. In his open letter to Commercial Metals' board, he said he would nominate three of his associates to be board directors at the company's 2012 shareholder's meeting.
"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 wrote.
Commercial Metals argued that it has made considerable progress in improving its financial performance, pointing to the restructuring of its North American operations, the sale of non-essential businesses and significant costs cuts.
It also noted the hiring of a new chief executive and chief financial officer, along with the appointments of four new board members over the past two years.
In a filing Sunday, Commercial Metals urged its shareholders to support the re-election of three of its directors at the upcoming shareholder meeting.