At the time, the press talked about it like it was another War of Northern Aggression.
Back in 1982, a 46 year-old Carl Icahn tried to take control of a 100 year old textile company called Dan River Mills, located in Danville Virginia. The corporate raider’s siege lasted less than a year, and he was only repelled when the entire town banded together to buy shares of the company.
This was nothing like the now 77 year-old Icahn’s current fights fellow hedge fund manager Bill Ackman, or Dell founder, Michael Dell.
In Danville, automobile and appliance salesmen offered shares of the company with purchases, and local businessmen paid millions for full page newspaper ads reading “”KEEP DAN RIVER AT HOME – BUY DAN RIVER STOCK!” Residents lined up outside brokerages to buy stock to stop Icahn’s hostile takeover.
The raid still lingers in the town’s memory, in an article about the Mill written only two years ago, former employees remember the raid and the raider.
“Icahn was the worst … you had your ups and downs, but the period of fighting Icahn was probably the most intense,” said Rodney Reynolds, who retired as senior vice president and chief financial.
Icahn started building up a position in Dan River in September of 1982 when the stock price was only $US15 a share. In October company started issuing 1.7 million shares preferred stock to employees in an attempt to dilute Icahn’s voting power, according to the Christian Science Monitor.
By November Icahn owned 15% of the company and offered 16.50 for 2 million shares (and under 50%) of the company. He was rejected.
Never daunted, he increased his bid to $US18 a share and was rejected yet again in December.
Meanwhile, behind the scenes Icahn was making moves. As his offer was getting trashed by Dan River’s board, he was bringing his stake in the company up to 19.2%.
At one point, Icahn increased his stake to 29% of the company.
The town retaliated to all of this by hiring New York law firm Paul, Weiss, Rifkind, Wharton & Garrison and filing a lawsuit against Icahn, charging him with racketeering in a Virgina Court.
In a complaint filed here in the Federal District Court for the Western District of Virginia…Dan River charged that Mr. Icahn had acquired its stock with ”proceeds derived through prior acts of extortion, mail fraud and securities fraud.”
”Dan River is the latest victim of Icahn’s tactics,” the complaint charges. ”Icahn and his group have already successfully dislodged over $US83 million from various American corporations in the last two months alone.”
And Icahn’s response?
‘I consider it an abomination that a company’s management should resort to these gutter and smear tactics,” Mr. Icahn said in a statement. ”These allegations are completely unfounded and are simply designed to dissuade me from continuing my interest in the company.”
None of this stopped the onslaught, of course.
So Dan River went for the (potentially) nuclear option. In January the company’s board got permission to form a separate, private, employee-owned corporation to buy the company. By February Chemical Bank had signed on to provide the $US150 million loan it would take purchase it.
Now — this option was nuclear because that loan would be (and was) crushing for the company, bringing Dan River’s debt-to-equity ratio from 49 per cent to 125 per cent.
“It was survival,” recalled Odell W. Hutson Jr., who worked as an engineer in the maintenance department, about the employee ownership plan.
In the 1980s, business got tough with plant shutdowns and a cutback on employee hours and some layoffs, Hutson said.
The fear that Icahn would take over lasted about a year, recalled Diana Raines, who worked as an invoice clerk. Employees knew Icahn’s reputation of shutting down companies and selling off assets to make money.
“It was scary when the Carl Icahn thing was going on,” Raines said.
Dan River tapped employee pension money, sold off collateral assets, and took Chemical Bank’s crushing loan in order to wrest control from Icahn. Eventually, after all the dust settled and the lawyers flew back to New York City, Icahn made $US8 million and Dan River stayed in the hands of locals.
It is said, however, that the debt Dan River took on to stave off Icahn made it hard to modernize.
The mill was bought by three businessmen in 1989, rallied profits through the 1990s, but filed for bankruptcy in 2004. Dan River’s last plant closed in 2007.
So in case you were wondering whether or not Carl Icahn ever loses, the answer is yes he does — but that doesn’t mean his opponent will survive the battle.
You can watch a video of one of the Dan River’s old smoke stacks getting demolished below: