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Icahn gets 2 directors appointed to auto machinery firm Dana. What’s ahead

Icahn gets 2 directors appointed to auto machinery firm Dana. What’s ahead

Icahn gets 2 directors appointed to auto machinery firm Dana. What’s ahead

Carl Icahn speaking at Offering Alpha in New York on Sept. 13, 2016.

David A. Grogan | CNBC

Organization: Dana Inc. (DAN)

Activist: Carl Icahn

Percentage Possession: 9.91{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809}

Ordinary Price: $20.95

Activist Commentary: Carl Icahn is the grandfather of shareholder activism and a real pioneer of the system. Although he is not slowing down at all, he just lately reached an arrangement with his son, Brett Icahn, to rejoin the company as the eventual successor. Brett strategies to utilize his father’s favored approach of pushing firms to make alterations made to raise their inventory costs, nevertheless he has not ruled out helpful bets way too. This is not a departure from the system Carl has succeeded with for several years. He can be pleasant (i.e., Apple, Netflix) or he can be confrontational (i.e., Forest Labs, Biogen), often it depends on the response of management. Brett is an outstanding activist investor in his have correct, not since he is Carl’s son, but for the reason that he has shown a very long track record of particularly productive activist investing. The Sargon Portfolio he co-headed at Icahn at a single time totaled all over $7 billion and provided really worthwhile investments in companies this sort of as Netflix and Apple. The Sargon Portfolio significantly outperformed the market with an annualized return of 27{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809}. However, prior to that Brett began in 2002 with Icahn as an analyst and was later on accountable for strategies like Hain Celestial (280.3{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} return compared to 46.7{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} for the S&P 500), Consider Two Interactive (81.5{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} versus 64.5{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} for the S&P500) and Mentor Graphics (106.4{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} as opposed to 79.4{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} for the S&P 500).

What is Going on?

On Jan. 7, 2022, Icahn and the corporation entered into a Nomination and Standstill Agreement pursuant to which the organization appointed Brett Icahn and Gary Hu (equally portfolio managers at Icahn Funds) as administrators to the board and agreed to include them on their slate of director nominees for election at the 2022 annual assembly. Icahn agreed to abide by specified standstill provisions until he no more time has administrators on the board.

Driving the Scenes:

Icahn has tremendous encounter in the automotive field, at present owning and operating Icahn Automotive, which makes up 28{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} of the overall internet income of Icahn Enterprises (“IEP”). Icahn Automotive was built, in massive part by acquisitions. Starting as an trader in Federal-Mogul in 2001, Icahn in the end obtained the total company by 2017. Icahn also acquired considerably all the U.S. vehicle elements assets of Uni-Choose, Inc., a leading automotive parts distributor for domestic and imported motor vehicles Pep Boys – Manny, Moe & Jack, a foremost aftermarket service provider of automotive assistance, tires, pieces and equipment throughout the U.S. and Puerto Rico the franchise enterprises of Precision Tune Vehicle Treatment and American Driveline Programs. Icahn ultimately bought Federal-Mogul to Tenneco in 2018 for $5.4 billion, and right now Icahn Automotive is made up of Pep Boys automotive aftermarket retail and assistance chain, Automobile Furthermore automotive aftermarket sections distributor, Precision Tune Car Treatment owned and franchised automotive company facilities, and AAMCO Whole Vehicle Treatment franchised support centers. The businesses of Icahn Automotive full around 22,000 staff, around 2,000 organization-owned and franchise places and 25 distribution centers through the U.S., Canada, and Puerto Rico.  

Icahn is not only knowledgeable about this marketplace, but he also has encounter with this enterprise. In March 2006, Dana declared Chapter 11 personal bankruptcy ,and Icahn acquired somewhere around $101.25 million of the firm’s then-$2.25 billion unsecured credit card debt with the intention of remaining an “lively participant” in the individual bankruptcy circumstance. Icahn all over again turned an equity operator in the fourth quarter of 2020 and filed a passive 13G on Feb. 4, 2021 with a 7.5{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} ownership. His intent since modified from passive to active and he filed this 13D upon taking two board seats at the organization.

There is no doubt that Icahn’s two portfolio supervisors, Brett Icahn and Gary Hu, will make price-additional directors as they not only have market knowledge, but are shareholder directors – either on its individual is important for a board member, but it is extremely exceptional to have a director with equally of these characteristics. So, if that is all Icahn does from an activist standpoint in this financial commitment, he really should be making significant value for shareholders. 

Nevertheless, it is tricky to forget the elephant in the area. Icahn designed his automotive field on acquisitions, and Dana seems to match in quite nicely in IEP’s automotive business enterprise. Furthermore, IEP states that its tactic in its Automotive section is to continue to improve its commercial components product sales and its automotive service company, and it will carry on to contemplate strategic choices in its automotive aftermarket parts small business to optimize benefit. When Icahn acquired Pep Boys, he also said: “We consider that with our abundant methods and know-how of the industry we will be capable to improve this enterprise and choose edge of consolidation alternatives, therefore benefiting clients, manufacturing companions and workforce, as effectively as our shareholders.” So, it is really hard to believe that Icahn is not at minimum taking into consideration Dana as a likely acquisition or merger prospect. However, as an trader who has normally prioritized corporate governance and shareholder worth, we count on that if he does purchase the corporation, it will only be after a product sales procedure by an impartial investment decision financial institution and an arms-length negotiation in which the Icahn directors recuse on their own.

Ken Squire is the founder and president of 13D Keep track of, an institutional research services on shareholder activism, and the founder and portfolio manager of the 13D Activist Fund, a mutual fund that invests in a portfolio of activist 13D investments. Dana is owned in the fund.