Download
HTML Embed
HTML EMBED
Click to Copy
Marketplace Morning Report

Premium rockin' in the stream world

Sep 18, 2019

Latest Episodes

Download
HTML Embed
HTML EMBED
Click to Copy
Marketplace Morning Report
Download
HTML Embed
HTML EMBED
Click to Copy
Marketplace Morning Report
Download
HTML Embed
HTML EMBED
Click to Copy
Download
HTML Embed
HTML EMBED
Click to Copy
Download
HTML Embed
HTML EMBED
Click to Copy
Download
HTML Embed
HTML EMBED
Click to Copy
Download
HTML Embed
HTML EMBED
Click to Copy
Marketplace Morning Report

Less than zero

Sep 17, 2019
Download
HTML Embed
HTML EMBED
Click to Copy
Marketplace Morning Report
Download
HTML Embed
HTML EMBED
Click to Copy
Download
HTML Embed
HTML EMBED
Click to Copy

The cage-rattling strategy of Carl Icahn

Dec 30, 2015
Share Now on:
HTML EMBED:
COPY

Autoparts chain Pep Boys has agreed to be acquired by financier Carl Icahn. Icahn had been in a bidding war with Bridgestone Corp. for the company, and he won with a bid of $1 billion, or about $18.50 per share. But the thing is, Icahn would have won even if he lost. 

Here’s how: A while back, Icahn’s company Icahn Enterprises bought a 12 percent stake in Pep Boys. Then he threatened to buy more, essentially taking Pep Boys over. That launched other bids for the company.

“Getting a bidding war going drives up the stock price,” said Peter Cohan, who teaches strategy and entrepreneurship at Babson College in Massachusetts. So even if Icahn lost the bidding war, he can cash out at a profit. “He’s done this over and over again,” Cohan said.

In this case, Icahn will very likely get control of the company, which he can then rearrange or sell for parts as he has done with other companies in the past. Either way he wins.
In the more than 30 years that Icahn has been at this, a central element to his strategy has been cage rattling.

“He gets into a company that’s not performing well, buys shares, gets on the board and frightens management,” said Mark Stevens, author of “King Icahn” and CEO of marketing firm MSCO. “He threatens the guys that are running the company that they are going to lose their jobs or control of the company.”

That’s unless they do something to improve the stock price or dividends, to somehow reward investors — meaning reward Carl Icahn.

A common criticism of this approach is that it can be very short-term focused.

“What’s the value that he’s adding to the operations?” asked Cohan. “Really, zero.”

Still, “those gains are not just for the activists but for all public-company shareholders,” said Robert Jackson, professor of law at Columbia.

With the Pep Boys deal scheduled to close during the first three months of 2016, we’ll see what Icahn does with it. But it’s a safe bet that Pep Boys won’t be the last cage he rattles.

 

If you’re a member of your local public radio station, we thank you — because your support helps those stations keep programs like Marketplace on the air.  But for Marketplace to continue to grow, we need additional investment from those who care most about what we do: superfans like you.

Your donation — as little as $5 — helps us create more content that matters to you and your community, and to reach more people where they are – whether that’s radio, podcasts or online.

When you contribute directly to Marketplace, you become a partner in that mission: someone who understands that when we all get smarter, everybody wins.

“I use clips from the show in my classes so students can grasp complex ideas and make connections to their own lives.”
Ashley, Ft. Worth, TX
Marketplace Investor