Billionaire Carl Icahn sent today a letter to Family Dollar Stores Inc. (NYSE:FDO)’s Executive Chairman and Chief Executive Officer, Mr. Howard Levine, suggesting him to put the company up for sale immediately.
Mr. Icahn disclosed a new position in Family Dollar around a week ago. This $8 billion market cap company operates more than 7,900 general merchandise retail discount stores in 46 states in the U.S. According to Icahn’s filing with the U.S. Securities and Exchange Commission, his fund owns around 10.69 million shares of the company, including options to purchase shares. The stake represents 9.39% of the company’s common shares.
In his letter, the investment guru expressed his strong concerns regarding the retailer’s future:
“Family Dollar has consistently underperformed its peers on most, if not all, operating metrics (same store sales, total revenue growth, sales per store, sales per square foot, operating margins, capital structure efficiency, etc.) and faces growing competition. In addition, the company’s shares have underperformed not only the shares of its peers but also the S&P 500 index over the last 1-year and 3-year periods.”
Mr. Icahn assured that, if the company were put up for sale, strategic and financial buyers should be considerably interested, recognizing massive synergies resulting from an acquisition. He continued by stating that now seems like a perfect time to sell “given the advantageous stock market and interest rate environment.” Moreover, he said that he believes that, given the substantial rise in Family Dollar’s stock price that followed the announcement of his new position in the company, a considerably majority of the shareholders would stand to benefit from the sale, and thus, support it.
In addition to this strong suggestion, Mr. Icahn requested for three of his fund’s representatives to be added to the company’s Board of Directors, immediately, in order to help the company face the transition and find the necessary buyers.
The billionaire closes his epistle with a harsh warning:
“If we cannot achieve this collaboratively, we intend to take this matter directly to shareholders by commencing a written consent solicitation within the next few weeks to remove all of the members of Family Dollar’s board of directors and replace them with individuals that will have a shareholder mandate to sell the company.”
The full text of the letter can be accessed below:
Disclosure: Javier Hasse holds no position in any stocks mentioned