The battle for financial control of Dan River Inc. intensified yesterday as the Danville, Va.-based textile giant offered to buy $15 million worth of its stock to thwart a takeover bid by investor Carl Icahn, who announced that he was thinking of selling his holdings to a third party.
Those actions caused the New York Stock Exchange to suspend trading on Dan River stock for most of the day. With 782,400 shares traded today, the stock closed up $1 at $18.
Dan River is one of the largest textile firms in the nation, with 26 plants and 12,000 workers. Since September, Icahn -- a specialist in hostile corporate takeovers -- has spent an estimated $15 million to become the largest single stockholder with 862,000 shares, or about 15 percent of its common stock outstanding.
Icahn is offering $16.50 a share for an additional 2 million shares. A totally successful offer would give Icahn about 49 percent of Dan River's common.
In a telephone interview, Icahn said he could not disclose how many shares had been tendered. His offer was to expire at midnight last night.
The additional 2 million common shares would leave Icahn's group with the voting power of only 37 percent of Dan River's stock. That is because Dan River recently created 1.7 million new preferred shares -- which carry voting privileges similar to the common -- and issued them to an employe stock plan. Icahn is challenging the preferred stock in court.
In his announcement yesterday, Icahn said that an unnamed third party "would seek to swap the shares purchased from the Icahn group with Dan River for certain assets of Dan River."
Icahn said the deal was not firm and refused to discuss it further. Dan River attorneys have said Icahn had an assessment made of the value of the company's property and equipment, suggesting that he was considering a quick sale.
The company announced it is prepared to borrow up to $15 million to buy its stock to "reduce the shares that may be available for purchase by the Icahn group under its tender offer." The company is also seeking a "white knight" to buy Dan River instead of Icahn and is using the firm of Kidder, Peabody Inc. as an intermediary.
Dan River hopes that stockholders who have already agreed to sell to Icahn will change their minds and sell to the company's representatives instead, company spokesman Tom George said.
Dan River won a federal court injunction that would have allowed Icahn to buy more stock, but would have prevented him from tampering with the company until allegations of stock piracy could be resolved. Icahn appealed and the 4th U.S. Circuit Court of Appeals last week overturned the injunction as an illegal restraint of free trade.