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Icahn Raises Stake In USX

October 7, 1986

PITTSBURGH (AP) _ Corporate raider Carl C. Icahn strengthened his grip Tuesday on USX Corp., disclosing he has raised his stake in the ailing industrial giant by 4 million shares for a total of 11.4 percent.

Icahn’s disclosure, made in a filing with the Securities and Exchange Commission, came as analysts speculated the company faces a crisis in trying to repulse his $7.97 billion takeover offer because it is reeling from setbacks in energy and steel, USX’s principal business.

″This thing could do tremendous damage. It could tear the company apart,″ said F. Gerard Adams, an economist at the University of Pennsylvania.

USX is ″going to take all kinds purely defensive moves that will be tremendously expensive and will not benefit the company,″ Adams said. ″They’ll be heavily saddled with debt if they survive and the steel industry will be the worst for it.″

Icahn, who less than year ago won a bitter battle to buy Trans World Airlines, on Monday offered USX $31 a share for the company’s 257.3 million shares outstanding in what he termed a friendly offer.

In making the proposal, Icahn revealed in an SEC filing that he already held nearly 10 percent of USX stock through the companies he controls. On Tuesday he reported to the SEC that he had purchased an additional 4 million- share bloc, raising his total to 29.3 million shares or 11.4 percent.

Icahn’s offer is the nation’s biggest attempted leveraged buyout, a type of transaction financed largely by borrowed money repaid with the target company’s earnings or sale of assets.

USX, formerly known as United States Steel Corp. and parent of the nation’s largest steelmaker, said Tuesday that it would evaluate Icahn’s proposal ″and respond at the appropriate time.″

Icahn did not return telephone calls left at his New York office.

Wall Street expressed skepticism about how serious Icahn was in his offer, holding the price of USX stock well below Icahn’s bid. USX stock was the most actively traded issue on the New York Stock Exchange, rising $1.12 1/2 a share to $27.62 1/2 .

Traders said there was a widespread feeling Icahn was attempting to force USX into a costly restructuring to drive up the price of its stock and earn him a big profit on his holdings.

Icahn and companies he controls paid an average of $21.50 a share for the 25.3 million USX shares purchased before the takeover attempt was announced. The additional 4 million shares were purchased for $26.50 each, according to his latest SEC filing.

″I suspect he’s interested in buying up stock and waiting for a company buyback, in which case he makes a quick profit,″ said Ruben Slesinger, an economist at the University of Pittsburgh.

″The other approach would be to buy it, sell off the profitable assets, and run a much smaller integrated steel operation. In either case he’s going to make a lot of money,″ Slesinger said.

Although some of Icahn’s takeover bids, most notably TWA and ACF Industries Inc., led him to the board room, few analysts said they thought Icahn hoped to replace David Roderick as USX’s chief executive.

Regardless of Icahn’s intentions, analysts said the war was likely to be a fierce one, draining USX of much needed capital.

Although the company is rich in oil, gas and steel assets, it lost $235 million in the first six months of this year, and its steel workers have not worked for more than two months in a labor dispute that mirrors the depressed times in the steel industry.

In addition, USX’s principal holdings, Marathon Oil Co. and Texas Oil & Gas Corp., have been hurt by declining energy prices worldwide.

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