Billionaire activist investor Carl Icahn amassed a new 9.4 percent stake in Family Dollar Stores Inc and plans to seek talks with the discount retailer’s management and board about ways to boost shareholder value.
Icahn and his affiliates bought 10.7 million shares and options for about US$265.8 million, according to a filing yesterday with the US Securities and Exchange Commission. He might push for operating changes and ask the company to explore strategic alternatives, as well as potentially seeking board seats, the filing said.
“Carl Icahn is not someone who’s taken lightly,” said Anthony Chukumba, a New York-based analyst at BB&T, who has a hold rating on the stock. “He has a track record.”
Family Dollar has been the subject of takeover speculation since another activist investor, Nelson Peltz, made an unsolicited bid in 2011 in an attempt to attract other suitors. None surfaced.
One impediment may be chief executive Howard Levine, who has been reluctant to sell the company his father founded. Even so, Family Dollar said earlier this year that it would conduct a business review to seek ways to improve its finances.
The discount chain has taken note of Icahn’s investment and is “committed to driving value for all Family Dollar shareholders,” it said in a statement after the disclosure.
“The Family Dollar board of directors and management team are open to dialogue with all shareholders and welcome input toward the shared goal of enhancing value,” the retailer said. “We are taking steps to strengthen our value proposition, increase operational efficiencies and improve financial performance.”
As an activist investor, Icahn has been a frequent antagonist to management at companies such as Apple Inc, Netflix Inc and Dell Inc. Icahn ended an acrimonious battle with EBay Inc last month, settling to add an independent director and dropping efforts to split off the PayPal payments unit after conversations with EBay chief executive John Donahoe.
With Family Dollar, Icahn hopes “to continue our streak of value enhancement,” he said on Twitter.
The chain of budget stores based in Matthews, North Carolina, faces mounting competition from rivals such as Target Corp and Wal-Mart Stores Inc. As sales slump, Family Dollars is closing about 370 underperforming stores and opening fewer new ones.
Icahn’s funds “see great long-term potential in the issuer’s industry and believe the issuer’s current situation is analogous to that recently faced by companies such as CVR Energy, Forest Laboratories, Chesapeake Energy and Biogen, as well as a number of other companies over the last two decades,” Friday’s filing said. In those examples, Icahn’s “involvement helped to generate tremendous returns for all shareholders,” he said.