Icahn And His Pill

The big news today is Carl Icahn’s reported stake of 9.393% in Family Dollar FDO.  Shares traded to $66.68 before the 8PM EST after-hours closing on Friday and rose further on Monday to a high of $70.30 on the news.  The company's performance has struggled over the past 9 months keeping with a theme we've seen of discount retailers underperforming while luxury retailers outperform.  Below is a chart for Family Dollar’s share price (left-axis) and EPS estimates and actuals (right-axis).

Icahn is known for his activism and looking at Family Dollar's Capital Expenditure quarterly percent change, an observer may wonder about the volatilty over the recent past leading to the inevidable question of why Icahn would take such a large stake in the discount store chain.  The answer is to merge Family Dollar with Dollar General DG which will now take a little longer than Icahn expected given Family Dollar decided to adopt their posion pill.  Capital IQ states the company's terms of their expired poison pill but does not have the terms of the new adopted takeover defense.  After reviewing the document filed today, the statement on page 15 (Section 11[a][ii]) in the paragraph appears similiar to the terms CapIQ has listed.

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So here we have yet another big name merger that will bring roughly 8,000 rebranded Family Dollar stores to a city near you.  Overall the US is leading the M&A market on a valuation basis.  M&A and alternative investments are hot right now and if history is a good teacher, market observers and particpants ought to be wary when such hubris and uncharacteristic actions are being observed.  For more detail on the M&A market click here.  To finish, I will leave you with a current chart of merge and aquisition counts and values by global region, respectively.

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