NEW YORK (CNNfn) - Billionaire corporate raider Carl Icahn offered Thursday to buy an additional 30 percent stake in cookie and cracker king Nabisco Group Holdings for $1.3 billion, amplifying a threat he made two weeks ago to secure control of Nabisco's board and negotiate the company's sale.|
In a letter delivered to Nabisco's board, Icahn offered to purchase 100 million Nabisco (NGH: Research, Estimates) shares for $13 cash apiece. That represents a 49 percent premium over the company's closing price of 8-3/4 on March 10, the day Icahn announced he intended to replace the company's board with his own nine-member slate.
The deal would give Icahn, who already owns more than 31 million Nabisco shares, a nearly 40 percent stake in the company and considerable influence over its board and upcoming board elections.
"I think the company should be put up for sale now," Icahn said in an interview with CNNfn. Nabisco's board "is leaving the shareholders out on the brink if they [reject] this."
Icahn gave Nabisco officials until next Tuesday, April 4, to approve his purchase, eliminate the company's newly adopted poison pill defense and reschedule the upcoming May 9 annual meeting so he would be able to vote his shares.
If Nabisco's board does not meet his demands, Icahn said a proxy fight for control of the board "is pretty much a sure thing."
In a release early Thursday afternoon, Nabisco said its board would review the proposal and urged its shareholders to take no further action until it reached a decision. A company spokesman said officials there would not comment further until the board meeting.
Nabisco shares climbed 2-7/16 to 11-3/4 Thrusday, the stock's highest close in more than three months.
Testing the waters
In his letter, Icahn said his first order of business after getting his own slate of directors nominated would be "to consider the sale of [Nabisco] at a favorable price."
Icahn insisted his aim in making the tender offer now was to avoid a "debilitating proxy contest" for control of Nabisco, the maker of Oreo cookies, Ritz crackers and Grey Poupon mustard.
"I think it's a fair offer," he said. "I don't know why a shareholder wouldn't want to do it."
But at least one analyst said the offer price was far too low for a company with Nabisco's fundamentals.
"This is a value significantly below what Nabisco is worth," said Nomi Ghez, an analyst with Goldman Sachs, who valued the company's stock at $20 per share. "Nabisco's fundamentals are fabulous and the market is starting to recognize that."
But Icahn indicated he isn't willing to wait any longer. Upset with Nabisco's floundering stock price, he announced three weeks ago he intended to replace the company's 12-member board with a slate of his own directors at the upcoming annual meeting -- but held off committing to an outright proxy fight until he could judge how much shareholder support he could obtain.
Nabisco officials publicly dismissed the threat at the time, noting he had proposed similar proxy fights three times in the last five years as the company debated how to separate its thriving food business from the legally-vulnerable tobacco holdings, only to withdraw them.
After much debate, RJR Nabisco Inc. ultimately decided to spin off its tobacco holdings last year and rename the holding company Nabisco Group Holdings, whose sole subsidiary is Nabisco Holdings Corp., the nation's No. 1 cookie and cracker maker.
But the new company's stock quickly descended into a rapid freefall under the weight of a depressed food sector and lingering concerns about the company's legal liabilities, fueling Icahn's demands for a sale.
"Last year, the company's board and management claimed to act in the interests of stockholders by spinning off the tobacco business of RJR Nabisco," Icahn wrote in his letter. "As you know, I fought long and hard to spin off the food company and not tobacco.
"I think you would now agree that this would have achieved a far superior result for stockholders," Icahn added.
Investors remain cautious
Analysts were unsure how much weight to put on Icahn's offer. While declining to comment on Icahn's threat two weeks ago, Nabisco's board did implement a poison-pill defense that same day, making his bid more difficult.
Icahn's legal maneuverability would also be hampered if he is forced to fight for control of the board via a proxy fight rather than a tender offer, because of rules that restrict certain actions once one party owns more than 15 percent of a corporation's shares.
Some analysts doubted just how serious Icahn was in making a takeover bid. He has, in the past, made millions when Nabisco's stock jumped just by threatening such actions.
Investors seemed to share the same thoughts, keeping Nabisco's shares well below his offering price for the time being. On paper, Icahn made more than $75 million on the stock Thursday.
But Icahn said he is serious about following through on his takeover bid this time. The tobacco liabilities, he said, are likely to get worse before they get better, potentially leaving the company in an even more vulnerable position next year than it is in now.
Icahn said he does not have a buyer lined up to purchase the company, but he has heard rumors that several companies are interested.