Carl Icahn took a victory lap on news that Family Dollar (FDO) is going to sell itself to Dollar Tree (DLTR), and called the deal “yet another validation of activist investor philosophy.” However, Dollar Tree begs to differ, and notes that Family Dollar and DLTR were in talks about merging before Icahn got involved and announced a 9.4% stake. Icahn’s inserting himself turned off another potential suitor, Dollar General (DG), whose management told the Wall Street Journal that it was “reluctant to participate in the negotiation of a transaction with Family Dollar if Mr. Icahn were to have role in or control over the process.” However, all’s well that ends well, at least for Icahn, who took $174 million to the bank in the aftermath of the deal; this amount was made in just 7 weeks. Not too shabby, even if it wasn’t actually Icahn’s idea.
Speaking of takeovers, the talk on Wall Street has been about the future of master-limited partnerships now the Kinder Morgan (KMI) CEO, Richard Kinder has decided to consolidate the MLP properties into KMI, and eliminate the MLP structure of his other operations. MLPs return a large amount to share holders in the form of distributions in return for low tax requirements, but the move was made to allow Kinder Morgan sufficient capital to grow the company. While some are critical of Richard Kinder’s decision, a Raymond James analyst praised the move, saying it was “the right thing for long-term shareholders.” The new Kinder Morgan will have “a streamlined structure, lower cost of capital, benefit of tax depreciation that will meaningfully enhance long-term value.”
However, shareholders of the Kinder MLPs are going to experience some short-term pain, as their tax bills become due. MLPs are tax-deferred, and with the reorganization, some have the unpleasant surprise of having to be taxed early, before selling the stock.
The question is: What is next for MLPs? A Baird analyst has suggested that Energy Transfer Equity(ETE) combine with Energy Transfer Partners (ETP), Sunoco Logistics Partners (SXl), Susser Petroleum (SUSP) and Regency Energy (RGP) to form a Kinder Morgan-like unit. ETP joining in may be complicated, because it is spinning off 2 of its own segments, currently.
Chiquita Brands rose 2.17% as it received a combined bid from Brazil’s Cutrale Group and the Brazilian investment firm Safra for $625 million, a 31% premium. This is to thwart its plans to merge with Fyffes and practice tax inversion by moving to operations to Ireland. Chiquita has been challenged lately, with management talking about lower demand for bananas as well as lower supply, thanks to droughts in Central America.