CMC Urges Stockholders To Reject Unsolicited Offer & Releases Guidance To First Quarter Results
After receiving an unsolicited proposal from IEP Metals Sub LLC, Commercial Metals Company is unanimously recommending that company stockholders reject the current offer. Carl Icahn was the one to propose the offer, trying to acquire CMC for $15.00 per share, which CMS says is vastly undervalued. CMC has now filed a Schedule 14D-9 with the SEC detailing the reasons for its rejection of Mr. Icahn's offer.
"It is the Board's clear and unanimous belief that Mr. Icahn's hostile offer substantially undervalues CMC and fails to reflect the long-term value potential of the Company," said CMC Lead Director Anthony A. Massaro. "We believe this is an opportunistic attempt by Mr. Icahn to acquire CMC at a low point in the business cycle and at a time when the execution of our strategic plan – led by the Company's new management team – is beginning to yield results. With his offer, Mr. Icahn is trying to take value for himself that rightfully belongs to CMC's stockholders."
The Board’s reasons for rejecting the offer and urging shareholders to do the same is based on their belief that the company’s own strategic plan for the future will deliver better value than the current offer. Also mentioned was the failure of Mr. Ichan’s offer to “deliver a compelling valuation or meaningful premium, even when compared to the Company's relatively depressed stock price,” according to CMC.
The offer was deemed “opportunistic”, “financially inadequate” and timed at a rough patch in the business cycle, when shares are traded at historically low values.
CMC said the offer provides the Company's stockholders “a miniscule premium of 3.9% to the Company's one-year average price of $14.43 per share (as of November 25, 2011).”
On December 18, 2011, each of Goldman, Sachs & Co. and Moelis & Company LLC delivered the Board the written opinion that offer “was inadequate from a financial point of view to such holders.”
Along with this, CMC just released their guidance for its 1st quarter, ended November 30, 2011. CMC expects first quarter earnings ranging from $0.87 to $0.97 per diluted share, up from $0.01 earnings per share recorded for 1Q11 and the $1.04 loss reported for the previous quarter.
This quarter will incur approximately $18 million for severance costs from closing its Croatian pipe mill. The company has said “At the end of the first quarter of fiscal 2012, production in the melt shop and rolling mill ceased. Final shipments will be made in the second quarter of fiscal 2012.”
First quarter earnings will be released on Friday, January 6, 2012.
Source: Commercial Metals Company