Icahn Drops Offer for USX but Will Retain 11.4% Stake : Concedes Steelmaker’s Decision to Redeem Notes Thwarted Bid, Says He’ll Keep Options Open
After waging a three-month takeover battle that almost no one on Wall Street took seriously, investor Carl C. Icahn Thursday withdrew his $8-billion offer for USX Corp., while hinting that he may still have designs on the steel and oil giant formerly called U.S. Steel.
In a filing with the Securities & Exchange Commission, Icahn said that while abandoning his $31-a-share bid for the nation’s largest steelmaker, he retains the option of raising his 11.4% stake and appealing directly to shareholders by soliciting their votes to replace the USX board of directors.
Icahn’s explanation for dropping his offer was that USX in effect had forced him to raise an additional $3 billion in takeover financing, making his offer “virtually impossible to consummate,” he said in a letter to USX Chairman David Roderick dated Thursday.
Specifically, he cited USX’s decision late last month to disregard Icahn’s objections and call for redemption of about $3 billion in notes that U.S. Steel had issued to finance its 1981 takeover of Marathon Oil Co.
‘Offer Never Existed’
Wall Street took a different view.
“How can you withdraw an offer that never existed?” asked Pershing & Co. securities analyst Andrew Gray III. Gray’s view that Icahn never had a serious offer on the table was widely held by other analysts, as well as by investors. The stock of USX fell only 75 cents a share after the announcement, to close at $22 on the New York Stock Exchange. It was the Big Board’s second most-active issue.
Icahn proposed on Oct. 6 to buy USX in what he termed “a friendly deal” that would remain open until Oct. 22. But Oct. 22 came and went, and Icahn took no action.
Other analysts interpreted the abandoned fight as evidence that Icahn’s financier, the investment firm of Drexel Burnham Lambert, was having trouble raising the additional $7 billion Icahn needed. Some also said Icahn already has his hands full with Trans World Airlines and doesn’t need to tackle the problems of the huge steelmaker.
“There’s a certain feeling on the street that he is more a stock jockey than an acquirer,” said Barry Sahgal, a securities analyst for the New York investment firm of Ladenburg, Thalmann. “He was finding it very difficult to penetrate Roderick’s battle front and not many believe he can manage this type of company.”
Icahn took over TWA a year ago after a fierce battle and is now the airline’s chairman despite no previous experience in the airline business. Critics say he knows even less about the domestic steel business, which is plagued by competitive woes and excess steel capacity around the world.
USX--which said it had not yet seen the filing by late Thursday and would have no comment until today --also has been troubled lately by plunging petroleum prices and by a prolonged strike by its 22,000 United Steelworkers employees that is heading into its sixth month.
Fallout From Scandal
Drexel executives could not be reached Thursday for comment on Wall Street speculation that the USX battle is further fallout from the Dennis B. Levine-Ivan F. Boesky insider trading scandal. The investment firm has been subpoenaed in connection with the huge scandal, and its ability to obtain financing commitments for takeovers has been questioned as a result.
The scandal has been blamed for the collapse of at least two other Drexel-aided deals: Revlon’s threatened takeover of Gillette and Lear Siegler’s proposed merger with Wickes. And some have been predicting the collapse of the USX offer ever since the company’s stock price took a beating in the days immediately following the Nov. 14 announcement that Boesky would pay the government $100 million for his alleged insider trading activities.
Still other analysts viewed Icahn’s pullout as a way to give himself more latitude while intensifying the pressure on USX management to undertake a restructuring, a move that presumably would earn Icahn large profits on his USX stock holdings.
Before Icahn ever entered the scene, the company began what it said at the time was a 30-day study of possible restructuring steps. Wall Street immediately began predicting that the company intended to form a limited partnership to hold some of the company’s energy assets or to spin off the company’s steel unit or both.
USX Plan Undisclosed
Almost four months later, USX has yet to disclose its plan. But company executives said recently they intend to present a restructuring plan to the USX board of directors by the end of January. A board meeting is scheduled for Jan. 27.
In his letter to USX Chairman Roderick, Icahn said his affiliates had offered to make available $1 billion and that Drexel had pronounced itself “highly confident” that it could raise the remaining $7 billion.
But because Drexel’s assurances didn’t give Roderick “sufficient financial comfort,” the letter says, USX declined to make its books available to Icahn. And Icahn, in turn, declined to sign a standstill agreement promising that he wouldn’t buy additional USX stock.
