Icahn Takes Yet Another Swing at XO

January 21st, 2011 by · 39 Comments

Billionaire Carl Icahn is trying once again to buy out minority shareholders of XO Holdings (news, filings).  In an SEC filing yesterday, his vehicle ACF Industries Holding Corp has offered to acquire the common shares he doesn't already own for $0.70 - which is actually below both the close yesterday of $0.75 and the $0.80 he last bid.  That price is going to satisfy absolutely nobody, especially given upbeat guidance and numbers in the fall.  Other than Icahn of course.  This could be the start of the final season of As XO Turns, but there are many episodes yet to go.  The first question to be resolved is whether XO's board can assemble enough supposedly independent directors to evaluate such a deal - they disbanded that special committee last year and one of the board members that was on it has since resigned.

Some sort of move like this was sure to come soon, ever since the company's planned reverse split and rights offering failed to materialize with the New Year.  The company needs cash to fund its expansion plans with, but has refused to take on any debt except all those preferred shares they like to sell to Icahn.  There are only so many ways to do that.  Icahn has tried to buy out minority shareholders several times already, and they still aren't done with the lawsuits from the last time.

However, Icahn knows $0.70 is going nowhere - he's a smart guy.  So this is probably just an opening bid.  As in the past, ACF says in no event is it interested in selling the company to anyone else - in order to prevent an actual auction.  There are any number of bidders out there who would be willing to bid more than that if allowed to, as XO has real assets that could mean a lot in the right hands - 3000+ on-net buildings on 9000+ metro route miles for starters.  Tops on the list of interested bidders would be PAETEC, TW Telecom, Zayo, Level 3, Earthlink... and I could go on.

But none of those will do anything until the Icahn situation is resolved.  I'd definitely wager though that if Icahn managed to buy out minority shareholders, he'd soon flip it for a profit.

Categories: CLEC · Mergers and Acquisitions

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39 Comments So Far


  • Homer says:

    Rob… the key part of the SEC filing is the disclosure that Icahn will begin negotiating directly with R2, the Class Action plaintiffs, and their advisors… effectively bypasing XO’s board… this is completely unlike all the offers before it… Icahn always tried to use the bogus Board to approve some bogus deal… this time that is not the case… there is a real chance this might be last chapter of XO as a public company… 70 cents is just part of the posturing… that number will change quite dramatically

    • Rob Powell says:

      Well, the filing didn’t actually say R2 and the class action plaintiffs, it said:

      We request the opportunity to have representatives of ACF Holding meet with those persons who would be considering the proposal for the Company together with the advisors to such persons to engage in a dialogue about why ACF Holding believes that the proposed $.70, price net per share in cash, represents appropriate consideration to be paid to the minority stockholders.

      There’s enough ambiguity in there to make me wait and see just who is at the table. But you may be right, he could be ready to make a deal. It’s only been how many years since he should have…

      • en_ron_hubbard says:

        Rob,

        Any negotiation process will be with a special commitee of the Board.

        • Rob Powell says:

          What special committee would that be? 🙂

          • en_ron_hubbard says:

            They (the board) will appoint a committee. Now, how they find disinterested directors to serve on that is an altogether different question. What is clear from a legal standpoint is that they (the Board) cannot abrogate their responsibilities and let Icahn negotiate with minority shareholders who are simultaneously suing him and the company itself. It is the responsibility of the Board to deal with this– it’s just that simple. If they reach the wrong conclusion (or any conclusion) in the context of hop;ess conflict then they will be sued again. Around we go.

      • Homer says:

        “…those persons who would be considering the proposal for the Company together with the advisors to such persons to engage in a dialogue…”

        Those “persons” mean R2 and the Class Action counsel…. typically the buyer only talks to the Board… the purpose of this filing is to tell all investors Icahn will be negotiating directly with a few shareholders… as a matter of fact, I believe the whole purpose of this filing is to give those “persons” access to non-public information so that they can properly evaluate the proposal

      • Anonymous says:

        I guess will find out soon. If R2 sends out one of its entertaining letters to the board then Icahn has no intention of dealing with them outside of court. If R2 is silent on this one then the negotiations are on with the two plaintiffs. Both plaintiffs are due in court next week at the same time with the same judge.

  • carlk says:

    Enron and Homer must be feeling a little itchy this morning.

    This is what happens when you place your hard earned shekels with flea bitten, rabid dogs who should be in prison.

    Would you believe I like Icahn less than that aristocrat, Rockefeller? At least Rockefeller agrees with the FCC’s internet mandates of late, although he would prefer they apply the same open internet rules to “wireless” as “fixed wires,” if I read him correctly.

    They made sweeping arrests of 100 mob guys in the northeast yesterday, although none of it seemed to be tied to their involvement with the Wall Street Casino.

    When they get closer to the leaders of that beast, we’ll see this WOLF of Wall Street, Icahn, in cuffs and an orange jump suit. It won’t be soon enough for the investing populace to see! IMO

    http://www.washingtontimes.com/news/2011/jan/20/feds-arrest-over-100-ny-jersey-mob-takedown/print/

  • Another Lawsuit says:

    Tripp Levy PLLC, a leading national securities law firm, announces an investigation into the acquisition of XO Holdings Inc. (OTCBB:XOHO.ob – News). On January 19, 2011, Carl Icahn, the Chairman and holder of over 91% of the outstanding shares of XO, proposed to acquire the remaining shares of XO that he does not already own for only $0.70 per share. Icahn stated that in no event will he vote his shares in favor of another bid by a third party.

    The investigation concerns, among other things, whether the consideration to be paid to XO shareholders is grossly unfair, inadequate, and substantially below the fair or inherent value of XO. Indeed, the offer is 6.7% below the price that XO’s shares traded at the day prior to the announcement of this offer. The investigation further concerns whether Icahn, as the majority holder, as well as the directors of XO may not be acting in XO shareholders’ best interests in connection with the proposed transaction.

    If you own XO common stock and you wish to discuss this matter with us, or have any questions concerning your rights and interests with regard to this matter, please contact:

    Tripp Levy
    Tripp Levy PLLC
    125 East 82nd Street
    9th Floor
    New York, New York
    Toll Free: 877-772-3975
    Email: contact@tripplevy.com

  • carlk says:

    Hey enron, do you own a gun? IMO

    • en_ron_hubbard says:

      hey carlK,

      Only two things will happen here. One is neutral and the other is good. I am content to let the rule of law operate. i know what these assets are worth and if that is the result then, again, I will be content.

  • Tony D says:

    And this adds to the unemployment line. Pretty messed up.

  • carlk says:

    Enron, you had me as soon as you said, “the rule of law.”

    Well then, I wish you well, sir, assuming you are a male, of course. 🙂

    • en_ron_hubbard says:

      Thankyou for your wishes Carl. BTW the Reagan quote comes from his Presidential debate with Jimmy Carter.

      • carlk says:

        With the power of the internet behind us, there is no “matter” including words which can be lost. I thought he used to refer to his critics in the press similarly, but you’re spot on, Enron!

        Some things like “national healthcare,” are as old as the decades which preceded it. OTOH, I can’t say I disagree with Jimmy here, and if I had my dithers, there would be a healthcare model that resembled “Kaiser,” as to be truthful, since the birth of my children including the use of a “mid-wife” and no drugs, we remain very satisfied with their healthcare delivery system as a opposed to run away trains tacking on excessive, oftentimes, wasteful and unnecessary costs, even while excluding Obama’s lawyers. imo

        http://www.youtube.com/watch?v=Wi9y5-Vo61w

  • Tony D says:

    Rob or anyone I would like to know what you guys think the time frame will be of this finally ending. I feel more for the employees that will probably end up losing their jobs over this.

    • Anonymous says:

      Why would employees loose their jobs? They will have a couple of years before Icahn flips XO for 5 times what he I offering minority shareholders.

    • Rob Powell says:

      I don’t see an end in sight at this time, I am not as optimistic as Homer that there is a deal just around the corner.

      As for the employees, I would argue that it is Icahn’s toying with this company that has left them at risk for so long. XO has fantastic assets, and could easily be expanding and hiring under different leadership.

  • Carl has some Balls says:

    He offers $.80 to minority shareholders when the world was about to collapse. Now he offers $.70 or a measly $48 million when the future is starting to look bright for the company despite his best efforts.

  • Tad from NJ says:

    Does anyone know if the SEC is still in business? I assume not as they would never let this abuse of shareholders continue. If the SEC does still exist, does Carl Icahn control it?

  • Rob Powell says:

    Well, they formed the special committee, replacing Dell with Harold First. How First is independent is quite a question, as he serves on at least two other boards he was appointed to by Icahn, and was once the CFO of Icahn Holding Corp. Gee, I wonder which way he’s gonna vote…

  • Anon says:

    Is XO still around?

  • anon says:

    do you know how the internet works?

  • rumor mill says:

    Any truth to the rumors of XO being purchased by TW Telecom?

  • Anonymous says:

    So yesterday’s court decision’s implications are what? That Hillenmeyer now represents all XO shareholders in its fight wityh Icahn, if so why isn’t the stock up on this news?

  • Anonymous says:

    The reason the stock is not up is because XOHO is a bulletin board stock and not followed widely. Among those who follow the stock and this saga most people have their bets down and no one wants to bet on when Icahn decides to stop being stubborn and settle the case.

    My own opinion is the recent court activity means that a sale has been agreed to in principle (probably to TWTC) and they are cleaning up loose ends now. The class needed to be certified in order to have a single set of negotiations to settle the lawsuit. Remember, there are 6 or 7 lawsuits filed. Consolidation into a single lawsuit means a single set of negotiations to settle the case. I believe a settlement is forthcoming.

  • Anonmously says:

    So settling the lawsuit means what?
    Are all share holders entitled to some type of funds or just undoing what Icahn has done. Or by selling, will that drop all the suits if everyone agrees with the sell price.

    Also, rumor has it, around the end of August the company might be sold. Anyone has feedback on this?

  • Anonymous says:

    Settling means whatever the parties agree to. It is doubtful anyone is going to buy unless there is a settlement.

    • Anonymous says:

      The courts certified the class action – There was not a settlement. Although it would be impossible for a sale of XO to take place without a settlement with R2 and the Class Action.

      • Anonymous says:

        is their any chance of a settlement that favors R2 over other minority shareholders or does would a settlement apply to everyone?

        • Anonymous says:

          There is always a chance of anything but the probability of it happening is about as close to zero as it can be.

  • Anonymous says:

    One step closer to taking company private and or selling:

    http://www.sec.gov/Archives/edgar/data/1111634/000114036111035141/0001140361-11-035141-index.htm

    Looks like Icahn reached a settlement with the litigants and is pretty close to owning this thing outright. Say what you want but its clear he wants to control this thing completely. Personally he should sell it as he knows not what to do with it but rather another entity would and honestly the time is likely the best to sell given the landscape all around XO is changed radically. Icahn holding onto this will only accelerate XO’s path to irrelevance.

  • Anonymous says:

    The ‘settlement’ with the litigants was just that the court certified the plaintiff’s lawsuit. What was new in the filing you posted, you just pointing out the convert??

  • Rob Powell says:

    I don’t see anything new in this case. Still waiting for news of… anything.

    • Don't Trust Carl says:

      The additional shares on the 13D are just from the quarterly dilution Carl and the “Independents” crammed down the throat of the minority back in 2008 and not to any settlement or seller

  • Anonymous says:

    At these prices, the news you have to expect is that Icahn found *his* new CEO.

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