Carl Icahn has withdrawn his bid for XO Holdings (news, filings), according to an SEC filing. A week and a half ago, ACF Holdings bid $0.80 for the company and gave the XO’s independent Special Committee the weekend to decide. Apparently negotiations went beyond the deadline, but ACF didn’t raise its bid and XO didn’t make a counter proposal. I can’t see this little drama as independent of the XO/R2 litigation, in which a ruling is due soon on Icahn’s motion to dismiss. Depending on your point of view, this was either an honest, fair bid for XO by a concerned major shareholder, or little more than a puppet show designed to demonstrate the independence of XO’s board of directors before the judge.
History tells us only that he’ll be back for another bite sooner or later. So what now? The hint comes from Icahn himself, who said:
“This offer is 100% over,” Icahn said in an interview with Dow Jones Newswires. “I respect their wishes but I think they should’ve let the shareholders decide.” He added: “The company has to focus on raising more capital. It’s been a distraction for three or four months.”
Why raise capital? The next deadline on the horizon is the refinancing of the company’s class A preferred stock which comes due in 2010, which of course Icahn holds most of. Of course, XO managed not to find money last time around when it was growing on trees, nowadays it is much harder to find. No doubt this will be the next means of pressuring minority shareholders further after things settle down, unless of course R2 makes progress in its litigation.
Simultaneously, XO reported Q3 earnings today by filing its 10-Q, the PR will come tomorrow most likely [EDIT here it is]. Revenues slid 1% sequentially to $382.0M from Q2’s big $385.3M, with revenue pressure in integrated voice/data and legacy TDM surpassing growth in broadband revenues. However EBITDA rose from $37M in Q2 to what appears to be roughly $44M [EDIT actual was $44.1M] according to my calculations. The improvement in EBITDA comes from lower cost of service and higher gross margins, but the quarterly COS number does tend to be lumpy for XO.
While sequential growth eluded them this quarter, I don’t get the sense that these numbers are out of line, they seem fairly routine. They probably doesn’t matter at all to the stock price today, which will depend solely on how the market looks at the withdrawal of Icahn’s offer.
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