No 'Oohs,' 'Aahs' For Star Investor In Macy's Parent
It's getting harder for Carl Icahn to wow Wall Street.
Word that the billionaire financier has Federated Department Stores Inc. in his sights should have excited investors. Mr. Icahn has drawn a strong following ever since he famously pocketed more than $1 billion in profits from his fight to break up RJR Nabisco in the mid-1990s. The 70-year-old activist investor has averaged annual returns of about 35%, and his hedge fund is up about 15% this year, trouncing most rivals.
But the disclosure last week that Mr. Icahn filed for antitrust clearance to spend as much as $500 million to raise his stake in Federated -- the Cincinnati-based parent to Macy's and Bloomingdale's -- has helped the stock rise to only $43.67 in New York Stock Exchange composite trading yesterday, from $41.65 since the news emerged, despite a rising stock market.
Mr. Icahn is known for taking big positions in undervalued companies and then trying to force a change in management or strategy. His pressure this year on KT&G Corp., South Korea's largest tobacco maker, has helped spark big gains in the stock.
Some hedge-fund managers say they have resisted buying up Federated shares, even though many of Mr. Icahn's previous moves were aped by investors.
Mr. Icahn seems likely to push for a leveraged buyout of Federated, trying to entice one of the many private-equity firms laden with cash, rather than try to gain any control of the retailer. But Federated has already been through one such disastrous transaction, led by Canadian real-estate mogul Robert Campeau, who was unable to keep up with the debt payments. The result: Federated filed for bankruptcy-court protection in 1990. Some wonder if the company can handle a new load of heavy debt.
This time around, leveraged-buyout firms may be able to borrow money to buy the retailer by using Federated's vast real-estate holdings. Federated owns more than half of its 850 stores, valuable real estate in a strong commercial real-estate market.
In an interview, Mr. Icahn argued Federated's management is more capable of handling added debt than Mr. Campeau's team and he lauded its cash flows. He also noted that many on Wall Street were skeptical last year when he bought up shares of Kerr-McGee Corp., a stock that soared subsequently after Mr. Icahn threatened a proxy battle and the company later divested itself of assets and eventually agreed to a sale.
"I'm not taking on anybody. [Federated] is undervalued," said Mr. Icahn, who noted that he purchased Federated shares at lower levels. "The kicker is that I believe it is a perfect candidate for private equity ... and there is great underlying value in the real estate."
Still, there are good reasons for the market to be skeptical about how much impact Mr. Icahn will have. He held just 0.36% of Federated's shares outstanding as of the most recent June 30 filing.
While it is possible that he has added to his position, an additional $500 million investment would raise that stake to about 2.5%.
"Icahn tends to get a [substantial] position, but lately he hasn't been going for control very often," said David Dreman, chairman and chief investment manager of Dreman Value Management, who owned roughly 3.5 million Federated shares as of June 30. "The stock isn't cheap."
Shares of Federated have been climbing for months and stand near all-time highs, suggesting there are few grumpy investors to rally behind Mr. Icahn. The retailer's share price has gained about 40% in the past year -- four times the roughly 10% gain for the Standard & Poor's 500-stock index.
Federated shares sell at 19.5 times the company's expected earnings for 2007, according to Thomson Financial. That is slightly ahead of their historical average and richer than the per-share multiples of some key rivals such as J.C. Penney Co. and Nordstrom Inc.
Though Federated is clearly one of the few titans of the department-store world, with more than 800 Macy's stores in 45 states, competition remains savage. Federated's long-term growth rate is estimated to be in the low- t
o mid-single digits for sales at stores open at least a year and in the high- to mid-teens for earnings per share, analysts say.
Federated's management is well regarded, so a push to replace Chairman and Chief Executive Terry Lundgren or his team would likely hurt the stock, not help it. Yesterday, Federated reported a September same-store sales gain of 6.2%, better than Wall Street's forecast of a same-store sales gain of 5.5%, according to Thomson First Call.
"People don't necessarily look at [Mr. Icahn] as being able to unlock value here," said UBS analyst Michelle Tan, who has a "buy" rating on Federated shares. UBS doesn't own any Federated stock.
What about share repurchases, another common goal for activists like Mr. Icahn? Federated is sitting on more than $1 billion in cash. It has been using the money primarily to pay down $8.6 billion in debt related to its February 2005 acquisition of May Co. A $2 billion share-repurchase authorization was announced in late August.
Mr. Icahn certainly has a lot on his plate, and it isn't all rewarding. Mr. Icahn recently became a director of ImClone Systems Inc. and urged shareholders of the medical company to give him control by ousting half the board. The stock is down 6% in the past year.
Mr. Icahn also is still figuring out how to maximize his holdings of Time Warner Inc., which is up 5% in the past year, and Blockbuster Inc., down almost 14%.
He also controls American Real Estate Partners LP, which acquires and manages real estate among other activities and is up more than 50% in the past year.
伊坎还会有追随者吗？
对卡尔?伊坎(Carl Icahn)来说，现在他要作出令华尔街叫绝的举动真是越来越困难了。
这位亿万富翁、金融家对Federated Department Stores Inc.产生兴趣的传闻应该会令不少投资者兴奋不已。自伊坎在20世纪90年代中期在着名的分裂纳贝斯克公司(RJR Nabisco)斗争中获得了超过10亿美元利润之后，他总能吸引众多追随者。这位现年70岁的活跃投资者年均投资回报率为35%，他的对冲基金今年上涨了约15%，令大多数竞争对手相形见绌。
上周有消息披露，伊坎将斥资5亿美元提高他对Federated的持股量。此消息公布后，尽管当时大盘整体也在飙升，但Federated股票也只是从消息刚出现时的41.65美元略微上升至43.67美元。Federated是Macy's及Bloomingdale's的母公司。
伊坎的投资风格令他闻名于世：持有股价偏低的公司的大量股票头寸，之后努力推进公司管理或策略上的改革。今年他向韩国最大的烟草公司KT&G Corp.施加压力的行动就推动该公司股票大幅上升。
不过，一些对冲基金的经理人表示，他们不会买入Federated股票，即使伊坎之前很多举措都有投资者效仿。
伊坎很可能推动对Federated的杠杆收购，他的意图是吸引来手中现金充足的私人资本运营公司，而不是获得对这家零售商的控制权。但是，Federated已经经历过一次由加拿大房地产巨头罗伯特?康波(Robert Campeau)牵头的类似交易，结果康波无力偿还债务，令Federated损失惨重，被迫于1990年申请破产保护。因此，一些投资者现在对Federated能否再次承担巨额债务表示怀疑。
不过这一次，杠杆收购公司也许可以使用Federated持有的大量房地产来筹集资金购买这家零售商。Federated的850家店铺中一半以上的产权属于Federated，在强劲的商用商业房地产市场上这可是珍贵的资源。
伊坎在接受采访时表示，Federated的管理层在处理额外债务方面比康波的管理团队更游刃有余。他对Federated的现金流量状况表示赞赏。他还说，去年华尔街很多投资者对他购买Kerr-McGee Corp.股票也曾持怀疑态度。后来在伊坎扬言要发起代理权之争、并且公司剥离了一些资产后，公司股票开始大幅飙升。
“我没有和任何人较量。（Federated）被低估了，”伊坎说，他在价格较低的水平买进了Federated股票。“这样作的原动力是我认为它是私人资本运营公司的绝佳候选目标，其房地产具有极大的潜在价值。”
不过，市场有充分的理由怀疑伊坎所具有的影响力。截至6月30日，伊坎尽持有0.36%的Federated流通股。
但是他有可能增加持股量，追加的5亿美元投资将使他的持股比例提高至约2.5%。
“伊坎想获得巨大的头寸，但是他最近并不常寻求对某个公司的控制，”Dreman Value Management的董事长兼首席投资经理大卫?德利曼(David Dreman)说。“这支股票并不便宜。”截至6月30日，他共持有约350万股Federated股票。
Federated股票在过去数月一直在不断攀升，几乎接近历史新高点。这也意味着将站在伊坎阵营的投资者寥寥无几。这家零售商的股价在过去一年飙升了约40%，是标准普尔500指数(Standard & Poor's 500-stock index)同期10%上涨幅度的四倍。
据Thomson Financial，Federated目前的预期市盈率为19.5倍。这比其历史平均水平略高，而且高于J.C. Penney Co.及Nordstrom Inc.等主要竞争对手。
尽管在全美45个州拥有800家Macy's店铺的Federated是大型百货商场领域为数不多的巨头之一，但是它面临的竞争仍然十分激烈。分析人士称，Federated同店销售的长期增长速度预计将在1%－7%之间，其每股收益增幅在14-19%之间。
Federated的管理一直备受好评，因此任何取代其董事长兼首席执行长特里?伦德格伦(Terry Lundgren)或其团队的努力都可能使其股价下挫，而不是推高它。据Thomson First Call，Federated周四发布的9月份同店销售额上升了6.2%，高于华尔街所预期的5.5%的增幅。
瑞士银行(UBS)分析师Michelle Tan说：“大家未必需将伊坎看作是能够在华尔街释放价值的人。”他对Federated股票的评级为“买入”，瑞士银行不持有Federated的任何股票。
股票回购又如何呢？这可是伊坎之类的激进投资者的另一个共同目标。Federated目前有超过10亿美元的现金。它主要用这笔资金来支付2005年2月收购May Co.产生的86亿美元的债务。8月底，该公司宣布了一个价值20亿美元的股份回购授权。
伊坎现在当然还有很多其他投资项目，但并不是所有的都有好的回报。伊坎从9月28日开始了在ImClone Systems Inc.担任董事的第一周工作，之后他敦促这家医疗公司的股东 走一半董事会成员以使他获得更多控制权。这家公司的股票在过去一年下挫了6%。
伊坎仍在想方设法使他在时代华纳(Time Warner Inc.)及百视达公司(Blockbuster Inc.)的控股量最大化。时代华纳股票在过去一年上涨了5%，百视达股票下跌近14%。
他还控制了American Real Estate Partners LP。该公司从事收购及管理房地产等业务，其股价在过去一年飙升了50%以上。
Vanessa O'Connell / Gregory Zuckerman
