Icahn Wins, Takes XO Private

August 18th, 2011 by · 26 Comments

XO's minority shareholders had their day in court, but last night word emerged that the injunction they had been seeking against majority owner Carl Icahn's intended purchase of the remainder of the company had been denied.  The billionaire's ACF Industries and XO wasted no time, and at 4:45pm today they closed the deal at $1.40 per share as promised.  XO is now privately held, and has filed its notice of de-listing with the SEC.  So now what?

Well, minority shareholders still have more days in court - but will be seeking financial penalties now rather than a rollback of the past few years of deeds.  Indeed, it is the fact that such remedies are available that probably led to the denial - it was already probably far too late to turn back the clock anyway so why should the judge intervene now?  Exactly how the lawsuits turn out in the end is still anybody's guess.

But what this does is hopefully divorce the complaints against Icahn from the actual operations of the company.  That will be welcome news to employees, who certainly must be glad this season of the soap opera is over.  It was a black cloud completely beyond their control that just hung over everything and distorted everything from public perception to cash management.

The question is, what does XO do operationally now?  Actually, we probably won't hear much.  XO never said much more than the minimum required as a public company, and as a private company that isn't likely to change.  That is, unless Icahn now properly funds the company, hires a CEO that knows how to make money off of fiber, and gives him the freedom to do it right.  That would really shake things up, but Icahn has shown no interest in doing that thus far.

As for the mid-term future, it seems clear that Icahn won't be flipping this asset for at least 365 days, i.e. until he doesn't have to give any of the proceeds to minority shareholders according to the deal terms and he has time to properly separate the tax assets he has fought so hard for.  But one year is nothing, this company has been in a holding pattern for half a decade now.  Unless Icahn decides to put a pile of money in and start buying other fiber assets, XO's future still seems likely to end in a sale - probably in late 2012.  But that also, is probably not too upsetting to employees - a year and a half's job security in times like these is perhaps as much as one can hope for.

Investors hopefully have learned something here though.  Never put your money somewhere just because a very smart billionaire corporate raider did.  Just don't.

If you haven't already, please take our Reader Survey! Just 3 questions to help us better understand who is reading Telecom Ramblings so we can serve you better!

Categories: CLEC · Mergers and Acquisitions · Metro fiber

Join the Discussion!

26 Comments So Far


  • en_ron_hubbard says:

    Rob,

    Your last observation is probably right with one caveat– this stock did trade in the 10-15 cent range within the last two years. Notwithstanding the ownership, a decision to buy then or more recently at 70 cents resulted in a very nice return (or return of prior losses). Because Icahn was at the wheel the assets were always at a huge discount.

    • Carlk says:

      Enron, you are somewhat humorous attempting to validate the recent price movement considering your incessant commentaries about this name.

      There’s another name you were pumping along as well which I called you on in another venue, called Above.net(ABVT).

      How much longer will it take for fifty cent dollars to be available from the 30 cents price degradation according to your original call?

      For such a sharp guy, you’re having a bad run with your money, or are you? 🙂

  • captain clec says:

    Your predictions about Icahn are usually wrong. Reality is no one knows what he is going to do – not even him. XO is such a minor holding for him. Every year they say he is going to sell – SINCE 2003! What’s interesting is the fact he has been dumping money in XO. Salesforce.com; new laptops and new phone systems in all locations – all cost a pretty penny.

  • Anonymous says:

    Rob,

    Once again, your OPINION rather than facts is what is keeping this great blog, from becoming what it could be. You could become a great source of information on our great industry, but until you decide that taking your stupid un-supported facts out, it will remain the TMZ of telecom information.

    Have you looked at some of the real stats about XO? Gartner, Forrester, etc,? NO, you are a rumor hound, not a news (facts) hound.

    • Anonymous says:

      Chill a little bit man. Comparing Rob to TMZ is a little off the hook.

      • fluids_only says:

        Rubbish! Rob provides robust analysis (his predictions on quarterly earnings reports like LVLT get as close as anyone) and his strategic insights/predictions are based on analysis, not idle speculation. I’m an industry exec and find this one of the more useful blogs around.

        • Anonymous says:

          Agreed.

          Rob has done a great job with this site. To compare him to TMZ is ridiculous. Sometimes it’s tough (for some people) to accept the opinions of others. 🙂

      • Anonymous says:

        off the hook, telecom..I get it!

    • Facts are only a collection of popular opinion. You complain to Rob about not giving “facts”, but I notice you don’t offer up any yourself.

      Rob is indeed a great industry resource. His insight and definitely his opinion is what has made this a popular blog.

  • FBLDan says:

    Anonimity makes it easy to say these types of things. If you don’t like what he has to say and apparently you don’t then go somewhere else please. You have provided nothing and this is not a forum for childish name calling.

  • Papa says:

    This is the only I-mag I read daily and have come to enjoy. TR and a cup of coffee. Rob is almost always right on, unlike most other sources. Maybe someone pissed in his post toasties this morning. Probably Ichan.
    Chin up Rob. There’s always one in the crowd.

  • Brian Scully says:

    I always find it interesting when someone is critical and hides behind anonymous. Aside from the fact they must be a Telecom Ramblings fan or they would not be following Rob.

    Keep up the good work Rob.

  • Look for XO's EBITDA margins to drastically improve says:

    I guarantee that you will hear from XO more than ever as Icahn dresses up this pig for sale in 366 days. Now that Icahn has taken this company private and holds the coveted NOL’s, here is what will happen over the next year.

    1. Their marketing department will now be free to do its job and will let the public know of every major deal signed, where cap ex is being spent, etc. etc.

    2. EBITDA margins will magically improve from their current depressed levels to near 20%. Hell they may even go back to calculating EBITA like the rest of the industry. However, being a private company you will never know about the accounting change.

    3. Expenses will be rained in and the company will now actually operate like a for profit business. No longer will it be Icahn’s goal to operate this company in the red. The NOL’s are his now.

    4. Q2 will be the last quarter XO operates at a loss. XO will turn a profit this quarter and each and every quarter there after.

    5. Soon after the 365 day window is over with the Company will be up for sale. Windstream, TWTC, Level 3, etc. etc. will purchase the company for at least a 250% premium to what Icahn paid minority shareholders.

    6. Those loyal employees (lambs/puppets) who thought Icahn took XO out of bankruptcy because he thought it was a great company will finally face reality and realize the only reason he bout the turd was for the $1 billion plus in NOL’s and will be looking for a new job.

    7. In the not to distance future Icahn’s will burn in Hell, if there is such a thing.

    • Brian CZ. says:

      I agree on everything but 4 and 5. A merger or sale doesn’t always mean a lost job. They have a huge network with a very large customer base. Maybe some but not all.

    • Ralph says:

      Wow, that’s a brilliant theory. Ichan lets XO flounder in order to get it cheap. Not a big risk of being found negligent since he can say it was a dog and investing a lot in the company without full control would have increased his risk.
      Now that it’s private, he turns it into a cash cow.

  • Carlk says:

    Powell does a great job, almost all of the time. His number crunching work across the space is stellar. However, you can see that he is a man who has been weathered by the constant battle of building an internet where the very builders who do so, at least by their common shareholder base, do not get rewarded for their hard work. I loved the mild slaps he threw at (3) in his Limelight “Federation” piece! Who in their RIGHT FRICKEN MINDS would embark on such a MAMMOTH TASK in the MULTI TENS OF BILLIONS expecting not to be rewarded in their stock price! It must be Warren Buffett and Bill Gates inside such a CLUSTER F&&&! 🙂

  • Hammerdinger says:

    Look for XO’s EBITDA margins to drastically improve’s comments are correct especially when the new CEO eliminates all the overhead in the accounting & legal departments needed to to report & support a public company (not to mention getting a real CFO). Plus eliminating the SVP Regulatory & 1/2 of that money pit. CI might now truly want to grow this biz – wouldn’t that be a shocker.

    • Mr. Poppers says:

      Right you are. Fire CFO, SVP of regulatory, and CIO. Need to wash out CIO teams as well as finance and access teams.

      • Anonymous says:

        Well Mr. Poppers CI got 1 out of 3 however the 2 left are awful citizens & will totally screw this to the wall. CFO will amputate body parts to save her ass & look good to CI. How tragic for the real employees & the customers. This pig is getting dressed for the auction block.

  • CroweLoves TOFU says:

    Might I suggest that my friend Carl will sell to Google for a cash and stock deal? I guess I just did.

  • Hammerdinger says:

    Good suggestion & possibility.

  • mhammett says:

    Good. I’m tired of hearing about XO and Icahn.

  • tr fan says:

    Rob, big fan of the site. Keep up the good work,

Leave a Comment

You may Log In to post a comment, or fill in the form to post anonymously.





  • Ramblings’ Jobs

    Post a Job - Just $99/30days
  • Event Calendar