Icahn obtains the appointment of 2 directors in the automobile machinery company Dana. What awaits us

Carl Icahn speaking at Delivering Alpha in New York on September 13, 2016.

David A. Grogan | CNBC

Company: Dana Inc. (DAN)

Activist: Carl Icahn

What is happening?

At January 7, 2022, Icahn and the company entered into a nominate and standstill agreement under which the company appointed Brett Icahn and Gary Hu (both portfolio managers at Icahn Capital) as directors of the board and agreed to include them in their slate of nominees for election at the 2022 annual meeting. Icahn has agreed to abide by certain standstill provisions until he has no more directors on the board.

In the wings:

Icahn has considerable experience in the automotive industry, currently owning and operating Icahn Automotive, which accounts for 28% of Icahn Enterprises’ (“IEP”) ​​total net sales. Icahn Automotive was built, largely through acquisitions. Beginning as an investor in Federal-Mogul in 2001, Icahn eventually acquired the entire company in 2017. Icahn also acquired substantially all of the U.S. auto parts assets of Uni-Select, Inc., a major auto parts distributor for domestic and imported vehicles; Pep Boys – Manny, Moe & Jack, a leading supplier of aftermarket automotive services, tires, parts and accessories in the United States and Puerto Rico; the franchise operations of Precision Tune Auto Care; and American Driveline Systems. Icahn eventually sold Federal-Mogul to Tenneco in 2018 for $5.4 billion, and today Icahn Automotive consists of automotive aftermarket retail and service chain Pep Boys, automotive parts distributor Auto Plus Automotive Service Centers, Precision Tune Auto Care Owned and Franchised Automotive Service Centers and AAMCO Total Auto Care Franchised Service Centers. Icahn Automotive businesses total more than 22,000 employees, more than 2,000 company-owned and franchised locations, and 25 distribution centers in the United States, Canada, and Puerto Rico.

Icahn not only knows this industry, but he also has experience with this business. In March 2006, Dana filed for Chapter 11 bankruptcy and Icahn acquired approximately $101.25 million of the company’s then $2.25 billion unsecured debt with the intention of being a “participant asset” to the bankruptcy case. Icahn became a shareholder again in Q4 2020 and filed a passive 13G on February 4, 2021 with a 7.5% stake. His intent has since changed from passive to active and he filed this 13D after taking two seats on the company’s board.

There is no doubt that Icahn’s two portfolio managers, Brett Icahn and Gary Hu, will make value-added directors because they not only have industry experience, but are shareholder directors – either in itself is valuable. for a board member, but it’s very rare to have a director with those two attributes. So if that’s all Icahn is doing from an activist perspective in this investment, it should create significant shareholder value.

However, it is difficult to forget the elephant in the room. Icahn built his auto industry on acquisitions, and Dana seems to fit very well into IEP’s auto business. In addition, IEP states that its strategy in its automotive segment is to continue to grow its commercial parts sales and automotive service business, and that it will continue to consider strategic alternatives in its automotive aftermarket parts business to maximize the value. When Icahn acquired Pep Boys, he also said, “We believe that with our abundant resources and industry knowledge, we will be able to grow this business and take advantage of consolidation opportunities, which will benefit customers, manufacturing partners and employees, and our shareholders.” So it’s hard to believe that Icahn doesn’t at least see Dana as a potential acquisition or merger candidate. However, as As an investor who has always prioritized corporate governance and shareholder value, we anticipate that if he acquires the company, it will only be after a sale process by an independent investment bank and a arm’s length negotiation in which the directors of Icahn recuse themselves.

Ken Squire is the founder and president of 13D Monitor, an institutional research service on shareholder activism, and the founder and portfolio manager of the 13D Activist Fund, a mutual fund that invests in a portfolio of 13D activist investments. Dana belongs to the fund.

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