XO Turns Down Icahn, For Now

September 28th, 2009 by · 7 Comments

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:

  1. Icahn submits a new, higher bid and we go around the merry-go-round all over again, or
  2. 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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Categories: CLEC · Mergers and Acquisitions

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7 Comments So Far


  • Anon says:

    Assume top tax bracket of 38% plus state approx 7-10% and it would be worth that pct. if the NOL offset taxable income somewhere else, especially if it could be applied to current year(s) instead of waiting to offset future taxable income. I’m not a tax lawyer either so this is best guess.

  • Brian Scully says:

    Rob, XO has always been at the top of your Poll as the company most likely to be acquired.

    In a world without Icahn, what are the XO assets and revenue stream worth?

  • carlk says:

    With the board’s special committee seemingly scrambling over minority shareholder angst in conjunction with litigation risk, what stops any legitimate 3rd party buyer from making a better offer without an approved board authorized “auction”?

    Stated differently, why does the xoho board have to wait for their Icahn God to respond with a better offer first?

  • carlk says:

    Oh, but isn’t that to a great extent, why they’re being sued, i.e., abandoning their fiduciary responsibilities?

    • Rob Powell says:

      I think his point boils down to the fact that XO’s board and Icahn are effectively the same entity, whether they issue press releases that way or not. If XO turns around and starts an auction process, it will be because Icahn told them to do it.

  • carlk says:

    Without a doubt, this makes perfect sense. The “wise guys” on his board, are playing his game, inch by inch.

    I think this Wall Street Wolf should be tried in public opinion like calling Charlie Gasparino to bring it up on cnbc, or better still, have Cramer fry his own on Mad Money!

    Icahn is one very large hypocrite who should be exposed. I know personally, because he censored my comments from his own blog!

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