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Icahn Makes $8 Billion Bid for USX

October 7, 1986

NEW YORK (AP) _ Financier Carl C. Icahn offered nearly $8 billion in cash Monday to buy USX Corp., the troubled steel-energy giant that has been the subject of repeated takeover speculation in recent weeks.

The $31-a-share offer for USX’s 257.3 million shares outstanding was one of the biggest acquisition proposals in U.S. corporate history and the largest proposed leveraged buyout, a transaction financed largely by borrowed money that is repaid with the target company’s earnings or sale of assets.

The proposal offered the possibility of giving USX’s unions part ownership in the company and came against a background of growing troubles at the parent of the nation’s largest steelmaker, a symbol of U.S. corporate might.

USX steelworkers have not worked since Aug. 1 in a bitter labor dispute caused partly by a slump in the American steel industry. At the same time, USX’s Marathon Oil Co. unit has suffered from declining oil prices.

Icahn, a New York investor who specializes in takeovers, said in a filing with the Securities and Exchange Commission that he and the companies he controls own 25.34 million shares of USX stock, or nearly 10 percent.

Under U.S. law, when an investor acquires more than 5 percent of a company, he must inform the SEC within 10 days of the purchase.

Icahn said in the SEC filing that he made the acquisition proposal in a letter dated Monday to the Pittsburgh-based company’s chairman, David M. Roderick, and its board of directors.

″We hope that our proposal will be favorably acted upon by the board of directors so that your respective advisers can proceed with the preparation of definitive agreements containing customary representations, terms and conditions,″ Icahn wrote in the letter.

He wrote that if USX accepted the offer, Icahn would attempt to win contract concessions from its steelworkers in exchange for a part ownership of the company or profit-sharing.

Such arrangements, he wrote, would make USX ″and the domestic steel industry more competitive with foreign producers and provide greater opportunities for USX’s employees.″

Bill Keslar, a spokesman for USX, said the company had no comment on Icahn’s offer.

United Steelworkers spokesman Russ Gibbons said Monday night that the union would have ″no problem″ discussing a possible profit-sharing plan with Icahn. The union’s recent contract agreements with four other steelmakers - LTV, Inland, National and Bethlehem - involve some sort of profit sharing or givebacks for employees, he said.

″Certainly, that would be a talking point. But it’s all supposition, what he’s really going to do,″ Gibbons said.

Many Wall Street analysts have said USX’s stock is undervalued at its current level in the mid-$20s. Last month, USX said it would study restructuring steps aimed at boosting its stock value.

Icahn, who described his offer as friendly, told the USX board in the letter that it had until Oct. 22 to respond. He said his investment adviser, Drexel Burnham Lambert Inc., was highly confident it could obtain financing for the acquisition.

Announced after the close of the business day, the offer capped more than two weeks of hectic trading in the stock of USX amid growing speculation that one or more takeover specialists were eying the company.

Other prominent corporate raiders previously reported as interested in USX included such personalities as T. Boone Pickens Jr., Irwin Jacobs and Robert Holmes a Court, an Australian financier. However, Pickens and Jacobs both sold their stakes in USX, Wall Street sources have said.

USX stock was the most active issue in nationwide trading Monday, rising 37 1/2 cents a share to close at $26.50. More than 12.65 million shares were traded.

If Icahn succeeded in his offer, the deal would surpass the record $6.1 billion leveraged buyout of Beatrice Cos., the consumer products giant, last April by the investment firm Kohlberg Kravis Roberts & Co.

Only two other corporate acquisitions would be bigger, both involving oil companies in 1984. Chevron Corp. bought Gulf Corp. for $13.4 billion and Texaco Inc. acquired Getty Oil Co. for $10.1 billion.

Icahn has gone after several big companies in the last few years, notably financially troubled Trans World Airlines, which he won control of last January.

As part of that takeover, Icahn negotiated labor concessions from the airline’s pilots and machinists, but he was unable to persuade flight attendants to accept bigger cuts. When the attendants struck, Icahn hired replacements at lower pay scales and most of the strikers are still out of work even though they ended the walkout.

Icahn has said TWA should become profitable again later this year.

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