Carl Icahn talking at Delivering Alpha in New York on Sept. 13, 2016.
David A. Grogan | CNBC
Enterprise: Dana gives power-conveyance and energy-management options for autos and equipment in North America, Europe, South America, and Asia Pacific. It affords sealing options, thermal-management applied sciences, and digital options to automobile and engine producers. The corporate operates in 4 segments: Gentle Automobile Drive Techniques, Industrial Automobile Drive and Movement Techniques, Off Freeway Drive and Movement Techniques, and Energy Applied sciences.
Inventory Market Worth: $3.1B ($22.11 per share)
Share Possession: 9.91%
Common Price: $20.95
Activist Commentary: Carl Icahn is the grandfather of shareholder activism and a real pioneer of the technique. Whereas he isn’t slowing down in any respect, he not too long ago reached an settlement together with his son, Brett Icahn, to rejoin the agency because the eventual successor. Brett plans to make use of his father’s favored strategy of pushing firms to make modifications designed to spice up their inventory costs, although he hasn’t dominated out pleasant bets too. This isn’t a departure from the technique Carl has succeeded with for a few years. He may be pleasant (i.e., Apple, Netflix) or he may be confrontational (i.e., Forest Labs, Biogen), usually it depends upon the response of administration. Brett is a powerful activist investor in his personal proper, not as a result of he’s Carl’s son, however as a result of he has demonstrated an extended observe document of extraordinarily profitable activist investing. The Sargon Portfolio he co-headed at Icahn at one time totaled round $7 billion and included extraordinarily worthwhile investments in firms comparable to Netflix and Apple. The Sargon Portfolio considerably outperformed the market with an annualized return of 27%. Nonetheless, previous to that Brett began in 2002 with Icahn as an analyst and was later chargeable for campaigns like Hain Celestial (280.3% return versus 46.7% for the S&P 500), Take Two Interactive (81.5% versus 64.5% for the S&P500) and Mentor Graphics (106.4% versus 79.4% for the S&P 500).
On Jan. 7, 2022, Icahn and the corporate entered right into a Nomination and Standstill Settlement pursuant to which the corporate appointed Brett Icahn and Gary Hu (each portfolio managers at Icahn Capital) as administrators to the board and agreed to incorporate them on their slate of director nominees for election on the 2022 annual assembly. Icahn agreed to abide by sure standstill provisions till he not has administrators on the board.
Icahn has super expertise within the automotive trade, presently proudly owning and working Icahn Automotive, which makes up 28% of the entire internet gross sales of Icahn Enterprises (“IEP”). Icahn Automotive was constructed, largely by means of acquisitions. Beginning as an investor in Federal-Mogul in 2001, Icahn in the end acquired your complete firm by 2017. Icahn additionally acquired considerably all of the U.S. auto components belongings of Uni-Choose, Inc., a number one automotive components distributor for home and imported autos; Pep Boys – Manny, Moe & Jack, a number one aftermarket supplier of automotive service, tires, components and equipment throughout the U.S. and Puerto Rico; the franchise companies of Precision Tune Auto Care; and American Driveline Techniques. Icahn in the end offered Federal-Mogul to Tenneco in 2018 for $5.4 billion, and in the present day Icahn Automotive consists of Pep Boys automotive aftermarket retail and repair chain, Auto Plus automotive aftermarket components distributor, Precision Tune Auto Care owned and franchised automotive service facilities, and AAMCO Complete Auto Care franchised service facilities. The companies of Icahn Automotive complete over 22,000 workers, over 2,000 company-owned and franchise areas and 25 distribution facilities all through the U.S., Canada, and Puerto Rico.
Icahn is just not solely educated about this trade, however he additionally has expertise with this firm. In March 2006, Dana declared Chapter 11 chapter ,and Icahn acquired roughly $101.25 million of the corporate’s then-$2.25 billion unsecured debt with the intention of being an “energetic participant” within the chapter case. Icahn once more turned an fairness proprietor within the fourth quarter of 2020 and filed a passive 13G on Feb. 4, 2021 with a 7.5% possession. His intent since modified from passive to energetic and he filed this 13D upon taking two board seats on the firm.
There isn’t any doubt that Icahn’s two portfolio managers, Brett Icahn and Gary Hu, will make value-added administrators as they not solely have trade expertise, however are shareholder administrators – both by itself is effective for a board member, however it is rather uncommon to have a director with each of these attributes. So, if that’s all Icahn does from an activist perspective on this funding, he needs to be creating vital worth for shareholders.
Nonetheless, it’s laborious to miss the elephant within the room. Icahn constructed his automotive trade on acquisitions, and Dana seems to slot in very properly in IEP’s automotive enterprise. Furthermore, IEP states that its technique in its Automotive section is to proceed to develop its industrial components gross sales and its automotive service enterprise, and it’ll proceed to contemplate strategic alternate options in its automotive aftermarket components enterprise to maximise worth. When Icahn acquired Pep Boys, he additionally said: “We consider that with our ample sources and information of the trade we can develop this enterprise and benefit from consolidation alternatives, thereby benefiting prospects, manufacturing companions and workers, in addition to our shareholders.” So, it’s laborious to consider that Icahn is just not not less than contemplating Dana as a possible acquisition or merger candidate. Nonetheless, as an investor who has at all times prioritized company governance and shareholder worth, we anticipate that if he does purchase the corporate, it is going to solely be after a gross sales course of by an impartial funding financial institution and an arms-length negotiation through which the Icahn administrators recuse themselves.
Ken Squire is the founder and president of 13D Monitor, an institutional analysis service on shareholder activism, and the founder and portfolio supervisor of the 13D Activist Fund, a mutual fund that invests in a portfolio of activist 13D investments. Dana is owned within the fund.