Icahn Hopes To Buy and Privatize Federal-Mogul

Carl Icahn is once again making headlines, although now it is over a deal with Federal-Mogul Holdings Corp. and not about a longstanding rivalry with fellow investor Bill Ackman. Icahn, founder of Icahn Enterprises and a famous activist investor, has been in negotiations to purchase the remainder of the minority stake in the auto parts manufacturing company in an effort to fill out his position. Icahn first made an offer to buy up the remaining stake in February, and in the intervening time the company's shares have skyrocketed by more than 80%, reaching to over $9 per share.

Icahn originally hoped to pay $7 per share for the 18% stake in the company that he did not already own. When those negotiations faltered, he upped his offer to $8 per share in June of this year. His goal in purchasing up the remaining minority stake is to privatize the company and to adopt it within his larger Icahn Enterprises. This would make it the latest of several automotive industry companies Icahn has showed interest in; the investor bought Pep Boys for about $1 billion in February, and in June of 2015 made an investment of about a third of a billion dollars to purchase up Auto Plus.

Icahn's latest offer, to buy up shares of Federal-Mogul for $9.25 per share, seemed to be successful. However, in recent developments, the billionaire Mario Gabelli, himself a major stakeholder in Federal-Mogul with a 36% position of the shares not owned by Icahn, may prove to make the transaction a bit more difficult for Icahn. A recent report from Icahn's investment agency indicated that Gabelli has suggested that $13 per share for the stake would be a fair price. Gabelli's view is that shares of Federal-Mogul are still significantly undervalued at the $9.25 price point. While Gabelli is not necessary for Icahn's plan to go through, and in fact Icahn could potentially buy up the 90% of shares of the company necessary to make it private without Gabelli's assistance, it would nonetheless be an easier and smoother transition for Icahn with Gabelli's support.

This would not mark the first time that Gabelli and Icahn have squabbled over auto industry prices. When Icahn moved to buy Pep Boys last year, Gabelli, who already owned a significant stake in the company, forced Icahn to increase his offer by entering him into competition with Bridgestone for the purchase. It remains to be seen whether Gabelli will sell off his stake of Federal-Mogul and whether Icahn's plan will go through as is, or if it will be back to the negotiating table to find another price point for the purchase.