The special committee of the board of directors of XO Holdings (news, filings) has responded to majority holder Carl Icahn's proposal to buy the 10% or so of shares he doesn't already own. In an PR released today, the special committee said:
the proposal ... to purchase all of the shares of XO Holdings' common stock not currently held by ACF at a price of $0.55 per share substantially undervalues the company, and, therefore, the special committee does not support the proposal. The special committee communicated to Mr. Icahn that it would consider a proposal that recognizes the full value of the company and reflects the significant benefits that would accrue to ACF as a result of full ownership.
Well, that's clear enough I suppose. It isn't a surprise of course, outside of Icahn himself it has been almost impossible to find anyone who thinks $0.55 was even close to a fair offer. Hence, the special committee couldn't have responded credibly either way. Note however that it took two and a half months to get around to answering, one wonders what they were thinking about...
However, the question is what happens next. There are two main possibilities:
- Icahn submits a new, higher bid and we go around the merry-go-round all over again, or
- XO's board begins some sort of auction process.
Frankly, while I think the best option for XO would be an auction, I think it's almost certain the first option will happen sometime in October. Anything else would be out of character. The question is: how much will the new offer be?
What does substantially undervalued mean? The answer seems to lie in the "significant benefits that would accrue to ACF as a result of full ownership." That is a reference to the NOLs, the deferred tax assets that Icahn would gain full permanent ownership of. I'm not a tax attorney, so does anyone want to put an actual number on that assuming he does have full usage of them?
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