Carl Icahn speaking at Providing Alpha in New York on Sept. 13, 2016.

David A. Grogan | CNBC

Company: Dana Inc. (DAN)

Activist: Carl Icahn

Share Ownership: 9.91%

Average Expense: $20.95

Activist Commentary: Carl Icahn is the grandfather of shareholder activism and a genuine pioneer of the tactic. Although he is not slowing down at all, he not long ago arrived at an settlement with his son, Brett Icahn, to rejoin the agency as the eventual successor. Brett designs to employ his father’s favored approach of pushing firms to make changes built to strengthen their inventory prices, although he hasn’t ruled out helpful bets too. This is not a departure from the strategy Carl has succeeded with for several yrs. He can be welcoming (i.e., Apple, Netflix) or he can be confrontational (i.e., Forest Labs, Biogen), generally it relies upon on the response of management. Brett is an extraordinary activist investor in his possess right, not mainly because he is Carl’s son, but simply because he has demonstrated a extensive monitor history of particularly productive activist investing. The Sargon Portfolio he co-headed at Icahn at a single time totaled around $7 billion and provided really rewarding investments in firms this kind of as Netflix and Apple. The Sargon Portfolio considerably outperformed the marketplace with an annualized return of 27%. Nonetheless, prior to that Brett started out in 2002 with Icahn as an analyst and was later responsible for strategies like Hain Celestial (280.3% return versus 46.7% for the S&P 500), Acquire Two Interactive (81.5% vs . 64.5% for the S&P500) and Mentor Graphics (106.4% versus 79.4% for the S&P 500).

What is Happening?

On Jan. 7, 2022, Icahn and the firm entered into a Nomination and Standstill Settlement pursuant to which the business appointed Brett Icahn and Gary Hu (both of those portfolio managers at Icahn Capital) as administrators to the board and agreed to involve them on their slate of director nominees for election at the 2022 annual assembly. Icahn agreed to abide by sure standstill provisions till he no lengthier has directors on the board.

Driving the Scenes:

Icahn has tremendous working experience in the automotive field, now possessing and working Icahn Automotive, which makes up 28% of the total net product sales of Icahn Enterprises (“IEP”). Icahn Automotive was constructed, in huge component by way of acquisitions. Beginning as an investor in Federal-Mogul in 2001, Icahn in the long run acquired the complete corporation by 2017. Icahn also acquired considerably all the U.S. automobile sections property of Uni-Decide on, Inc., a major automotive elements distributor for domestic and imported autos Pep Boys – Manny, Moe & Jack, a major aftermarket supplier of automotive services, tires, areas and components throughout the U.S. and Puerto Rico the franchise corporations of Precision Tune Car Care and American Driveline Techniques. Icahn finally offered Federal-Mogul to Tenneco in 2018 for $5.4 billion, and today Icahn Automotive is composed of Pep Boys automotive aftermarket retail and provider chain, Car Plus automotive aftermarket components distributor, Precision Tune Automobile Treatment owned and franchised automotive company centers, and AAMCO Full Auto Treatment franchised company centers. The organizations of Icahn Automotive complete over 22,000 employees, over 2,000 firm-owned and franchise destinations and 25 distribution facilities all through the U.S., Canada, and Puerto Rico.  

Icahn is not only educated about this field, but he also has working experience with this enterprise. In March 2006, Dana declared Chapter 11 individual bankruptcy ,and Icahn obtained close to $101.25 million of the company’s then-$2.25 billion unsecured debt with the intention of getting an “active participant” in the individual bankruptcy scenario. Icahn yet again turned an equity proprietor in the fourth quarter of 2020 and filed a passive 13G on Feb. 4, 2021 with a 7.5% ownership. His intent given that altered from passive to energetic and he submitted this 13D upon taking two board seats at the enterprise.

There is no question that Icahn’s two portfolio professionals, Brett Icahn and Gary Hu, will make benefit-added directors as they not only have field expertise, but are shareholder administrators – both on its very own is valuable for a board member, but it is quite uncommon to have a director with both of those characteristics. So, if that is all Icahn does from an activist standpoint in this investment, he should really be building major price for shareholders. 

Having said that, it is tricky to ignore the elephant in the place. Icahn designed his automotive business on acquisitions, and Dana appears to suit in incredibly properly in IEP’s automotive company. Moreover, IEP states that its approach in its Automotive phase is to keep on to grow its commercial parts sales and its automotive company organization, and it will keep on to look at strategic alternatives in its automotive aftermarket areas enterprise to improve value. When Icahn obtained Pep Boys, he also said: “We think that with our ample methods and information of the marketplace we will be able to expand this enterprise and take advantage of consolidation options, therefore benefiting buyers, producing partners and staff, as effectively as our shareholders.” So, it is really hard to imagine that Icahn is not at the very least thinking about Dana as a prospective acquisition or merger applicant. Even so, as an investor who has normally prioritized corporate governance and shareholder price, we expect that if he does purchase the firm, it will only be just after a profits process by an independent investment financial institution and an arms-length negotiation in which the Icahn administrators recuse themselves.

Ken Squire is the founder and president of 13D Keep an eye on, an institutional investigate company on shareholder activism, and the founder and portfolio supervisor of the 13D Activist Fund, a mutual fund that invests in a portfolio of activist 13D investments. Dana is owned in the fund.

By Tara