Exciting Days in Takeover-Land!

“What’s exciting is when you buy them when no one wants them,”

—Carl Icahn to the Wall Street Journal

Carl’s back. As reported in today’s Journal,

Carl Icahn is making a $2.75 billion bet that battered U.S. auto-parts suppliers are poised for a comeback. His rationale?

Mr. Icahn said the beaten-down share prices of auto suppliers like Lear have made them attractive values. “What’s exciting is when you buy them when no one wants them,” Mr. Icahn said in an interview [emphasis added]. And truer words word never spoken: it is exciting to invest when nobody else sees the value, or wants to take the risk that that value will be realized some time in the uncertain future.

But, according to my Bloomberg, the time when nobody wanted Lear—which happens to be one of many auto suppliers struggling to make something out of a commodity business under severe price pressure with a high cost union work force—was a year ago March, when the stock bottomed at $15.60.

Not yesterday, at the $34.20 opening price before Icahn’s bid got even fewer people not wanting the shares.

Now, I understand that when Carl Icahn walks into any room, he is very likely the wealthiest individual in that room. And his record for creating value for himself and his investors ranks up there in the thermosphere of all-time great investors.

But by my calculation, nearly $1.5 billion of potential value has already been absorbed by public shareholders who ventured to buy Lear when the stock was being thrown out in the mid-teens—the time when “no one” wanted to own poor, suffering Lear.

And grey-hairs will remember another company Carl Icahn bought “when no one wanted to own it.”

That company was TWA.

And Icahn’s tenure over that veil of tears turned out to be merely one of several times “no one” wanted to own what was, in the end, a commodity business under severe pressure with a high cost union work force.

Let the excitement begin!

Jeff Matthews I Am Not Making This Up

© 2007 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.