Icahn Proposes Temple-Inland Breakup

Los Angeles, CA 1/23/2007 03:39 PM GMT (TransWorldNews)

Justin Kuepper from SECInvestor.com reports: Temple-Inland Inc. (NYSE:TIN) shares moved up $3.32, or 7.14%, to $49.82 in early trading today after Carl Icahn disclosed a 6.73% stake in the company in a Schedule 13D filing with the SEC. In the filing, Icahn said that stock is undervalued due to the conglomerate structure of the company. Consequently, he plans to recommend a divestiture or spin-off of one or more of the company's component businesses in a quant play could unlock millions in unrealized value for shareholders.

According to the Schedule 13D filing:

"The Reporting Persons acquired their positions in the Shares in the belief that they were undervalued due to, among other things, the conglomerate structure of the Issuer in which various disparate and non-complementary businesses are combined under one corporate umbrella. The Reporting Persons believe that this structure obfuscates the true value of the Issuer's assets and note that various analysts have issued sum of the parts analyses that imply a value for the Shares that is significantly higher than their current market price. The Reporting Persons intend to seek to have conversations with members of the Issuer's management to discuss ideas that management and the Reporting Persons may have to enhance shareholder value, which may include, among other things, the divestiture or spin-off of one or more of the Issuer's component businesses (which may include Guaranty Bank, the corrugated packaging business, timberland holdings, the building products business and/or the real estate division). The Reporting Persons may consider engaging in a proxy contest to attempt to replace one or more members of the Issuer's staggered board of directors with persons nominated by the Reporting Persons, but have as yet made no definite decision to do so."

Does this plan make sense? Well, we must first remember that spin offs in general tend to outperform the overall market due to the way in which they are structured. Often times, parent company shareholders tend to immediately sell shares they are granted in the new spin off. Consequently, there is unjustified downside pressure on the new company's stock, which creates value for the enterprising investor. The spin offs would also help the company raise a substantial amount of cash while unloading any debt that it may have (which is fairly common in these situations). Finally, given the fact that these businesses share very few synergies, it is likely that they will perform better as independently traded companies; therefore, spinning them off would unlock value for shareholders. Overall, these factors make TIN a stock definitely worth keeping an eye on over the next couple of months!

Read similar stories and subscribe to our free newsletter at SECInvestor.com!

About SECInvestor.com
SECInvestor.com is a financial blog that uncovers the hidden gems through in-depth analysis of SEC filings so our readers can make more informed choices about their investments. SECInvestor.com is owned and operated by Accelerize New Media, Inc.

Website: http://www.SECInvestor.com

The commentary and reports presented here are issued solely for information purposes and should not to be construed as an offer to sell or the solicitation of an offer to buy any security. The opinions and analyses included herein are based from sources believed to be reliable and written in good faith, but no representation or warranty, expressed or implied is made as to their accuracy, completeness or correctness.

blog@accelerize.com
www.SECInvestor.com

Empty Image

Email Article to a friend | View Profile

Visit Blogs |