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Icahn

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Icahn

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Icahn

  1. 1. Carl Icahn Billionaire Investor
  2. 2. Carl Icahn Known for the “Icahn Lift” 79 years old, $20B+ net worth Raised in NYC Princeton (BA in Philosophy) NY University School of Medicine (dropped out) Started as a stockbroker on Wall Street in 1961 Founded Icahn & Co in 1968 Icahn Enterprises (IEP)
  3. 3. Investment Strategy <-> Contrarian ! Activist $ Value
  4. 4. 1 2 3 Purchase of Stock or Debt Promulgate Change Unlock Hidden Value Significant Financial Capital, Human Capital (experienced investment team) Experienced management teams, media coverage to bring about change, rapid exe- cution Financial expertise, ability to extract synergies through bolt-on acquisitions with port- folio companies • Dealing with board and management • Proxy wars • Tender offers • Taking control • Financial restructuring • Operational turnarounds • Strategic initiatives • Corporate governance changes Resources Required
  5. 5. Via subsidiaries IEP to issue debt Icahn’s personal money and funds from IEP Sources of Funds
  6. 6. 2 Types of Investments Subsidiaries Significant holdings
  7. 7. Subsidiaries Icahn Enterprise GP Icahn Enterprise LP Icahn Enterprise Holdings Icahn Capital LP PSC Metals Inc. AREP Real Estates Holdings WestPoint Home LLC Viskase Companies Inc. (VKSC) IEH Auto Holdings LLC Ferrous Resources American Railcar In- dustries Inc. (ARII) American Railcar Leasing LLC Tropicana Entertain- ment Inc. (TPCA) Federal-Mogul Hold- ings Corp. (FDML) CVR Energy (CVI) CVR Refining, LP (CVRR) CVR Partners, LP (UAN) 1% 1% 99% LP interest 100% 100% 100% 100% 100% 73% 77% 56% 75% 68% 82% 82% 66% 53%
  8. 8. Current Holdings Significant Position Public Companies Significant Holdings
  9. 9. Timeline of Recent Investments ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14 ‘15 Oil and gas assets Gain of $0.6b Acquired Icahn Capital Management Acquired 100% PCS Metals America Casino & Entertainment: $0.7b gain casino sale Majority interest in Federal Mogul 54.4% of ARI contributed by Carl Icahn 71.4% of Viskase contributed by Carl Icahn Majority stake in Tropicana Entertainment Majority interest in CVR Energy CVR Refining (IPO and secondary offering) CVR Partners (secondary offering) Majority interest (75%) in ARL ‘16 IEP Auto acquired all assets of Uni-Select Inc. in the U.S. Controlling interest in Ferrous Resource Total Assets $4.2b Total Assets $37.3b
  10. 10. Example 1: Failure in Blockbuster ‘04 ‘05 ‘06 Icahn bought 9.8m shares ‘07 ‘08 ‘09 ‘10 Blockbuster makes bid to buy Hollywood Entertainment Doubled his stake Won a Board seat Drove CEO Antioco out of company Sold majority of stake, at loss of 97% ‘11 Blockbuster filed for bankruptcy “Worst investment I ever made.”
  11. 11. Example 2: PayPal Spinoff $ b 2006 2007 2008 2009 2010 2011 2012 2013 eBay’s Revenue by Business Segment Marketplaces Payments
  12. 12. Example 2: PayPal Spinoff ‘14 ‘15 eBay announces PayPal spinoff Share price ↑7.5% or $56.63 Icahn (2% of eBay) proposes to spin-off PayPal Settles proxy fight, re: PayPal spinoff Spinoff completed eBay acquired PayPal in 2002, after its IPO ‘16 Icahn now owns 4% of each company; Revenue Growth eBay 10% PayPal 19%
  13. 13. Example 3: Herbalife ‘12 ‘13 SEC filing reveals Icahn’s 13% in HLF HLF falls 41% as Bill Ackman announces his $1b short Increased stake to 16.5%, $250mm FTC opened probe to investigate HFL His opposing position against Bill Ackman ‘14 Bill Ackman explains his short; HFL ↑25% ‘15
  14. 14. Icahn Capital Historical Return
  15. 15. Time Period IEP Berkshire Leucadia Loews S&P 500 Dow Jones Russell 2000 3y ended Jun 30, 2015 154% 64% 22% -4% 61% 47% 64% 5y ended Jun 30, 2015 190% 71% 35% 19% 122% 105% 120% 7y ended Jun 30, 2015 61% 70% -44% -14% 88% 88% 100% Apr 1, 2009 - Jun 30, 2015 327% 136% 77% 81% 195% 173% 222% Jan 1, 2000 - Jun 30, 2015 1426% 265% 261% 334% 9% 122% 204% Apr 1, 2009 - Jun 30, 2015 26.1% 14.7% 9.6% 10.0% 18.9% 17.4% 20.6% Jan 1, 2000 - Jun 30, 2015 19.2% 8.7% 8.6% 9.9% 4.2% 5.3% 7.4% Gross Return on Investment in Stock Annualized Return Overall Performance Record
  16. 16. Taking a Step Back Are there economic conditions where the the strategy works better? Low interest rates Acquisitions therefore are less costly. Abundance of cash rich companies Icahn believes that many companies are holding cash because they do not have positive NPV proj- ects to invest in. Prevalence of mediocre top management and non-caring boards.
  17. 17. Conclusion Actual activism is difficult To participate: • Icahn Lift • Invest in IEP
  18. 18. Appendices
  19. 19. NASDAQ: IEP
  20. 20. Company (Proposed) Acquisition Multiple Current Trading Multiple CVR Energy 4.7x 8.7x Lions Gate 4.4x 22.6x Clorox (failed) 11.9x 14x Dynergy (failed) 8.6x 18.5x Value Investing

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