Crown Holdings (NYSE:CCK) stock rose 6% after investor Carl Icahn announced he has bought 8% of the canmaker.
Icahn reportedly paid about $700 million for his stake in Crown. The value of the company rose about $520 million overnight, indicating a gain for Icahn of about $56 million.
CCK was due to open on Nov. 3 at about $71.20/share.
What Does Icahn Want?
Crown Holdings is a leading maker of aluminum cans, mostly for soft drinks.
The stock is down 40% this year as consumers eat out more, leading to a glut of inventory. The stock was matching the fall in market averages until Oct. 24, when it missed Wall Street earnings estimates by 73 cents/share. This sent the stock down almost 17% in one day, and it continued moving down to about $67.
Before earnings came out, analysts had a consensus rating of buy on the stock with an average price target of $95/share. Crown blamed depreciation on recent plant additions, and weaker North American sales, for the earnings shortfall.
Icahn’s plan is for Crown to sell non-core assets, like its transit packing unit, and possibly its aerosol can and packing unit, along with European operations. This would let it concentrate on cans, a business he insists is poised to grow. Once the divestitures are done and the can business comes back, he then wants Crown to buy back stock to increase its value. Crown bought the transit packing unit, then called Signode, for $3.9 billion in 2017.
Analysts are enthusiastic about the plan, as they usually are when a big investor tells a company to sell itself for parts and bail them out of a loss.
CCK Stock: What Happens Next?
Icahn’s swoop will likely succeed, although it will leave CCK smaller and more vulnerable to the forces which crashed it than it is today. If management resists, CCK stock will fall, only adding to the pressure for change.
On the date of publication, Dana Blankenhorn held no positions in any companies mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.