‘Activist’ investing pays off for Icahn

Carl Icahn, the billionaire investor, sounded pretty pleased Monday afternoon, following that mornin

Carl Icahn, the billionaire investor, sounded pretty pleased Monday afternoon, following that morning’s announcement that Dollar Tree will buy Family Dollar Stores for $8.5 billion in cash and stock.

“This is a big win for all shareholders of Family Dollar and yet another validation of the activist investment philosophy in general,” he said on Shareholders’ Square Table, a blog on which he posts occasionally about his actions as an “activist shareholder.”

That’s the euphemism these days for guys with money — they’re usually men — who buy into public companies with the goal of maximizing returns for themselves and other investors. Decades ago, the darker term “corporate raider” described the slash-and-burn strategies — liquidation, spinoff, downsizing — used then.

After public companies got wise to their tactics and amended bylaws to minimize their impact, the raiders morphed into activists who buy up enough shares to be noticed and then lobby for change at the company.

Icahn has done that with a long string of investments, as have others: hedge fund manager Bill Akman at J.C. Penney (although the turnaround envisioned with former Apple executive Ron Johnson as CEO misfired); NFL team owner Dan Snyder at Six Flags (who used a bruising proxy fight to get control of the amusement park operator, but was ousted after a Chapter 11 reorganization five years later).

Even Trans World Entertainment in Albany, which runs the FYE music-video-games retail chain, saw unsolicited buyout interest a few years ago from a Florida investment firm. That interest soon petered out.

When Icahn revealed his 9 percent stake in Family Dollar in early June, he said he would rout the board of directors if the discount retailer wasn’t put up for sale immediately. Sales and earnings have been soft at the company, which has 8,200 stores in urban and rural settings nationwide.

On Monday morning, Dollar Tree, a discounter with 5,000 stores in the suburbs, said it would acquire Family Dollar. The two companies operate in the same discount space, although Dollar Tree sticks to a firm $1 price point while prices at Family Dollar generally stay under $10.

Merged, they will keep the same pricing strategy and separate store names, although there could be some swapping of Dollar Tree and Family Dollar locations, Bob Sasser, Dollar Tree CEO, said in a conference call Monday.

He said geography, pricing and customer demographics make the combination “complementary,” meaning there shouldn’t be mass closings or layoffs to gain savings from the deal. That might have occurred if Dollar General, another discounter more akin to Family Dollar, had been the acquirer, as many — including Icahn — had expected.

On the Square Table blog, Icahn indicated he thought another suitor still could surface for Family Dollar, but said “we are extremely pleased” with the Dollar Tree deal.

After all, he could earn $174 million from the transaction, according to the Wall Street Journal.

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