Risk & Compliance

Icahn Gets His from Temple-Inland

After the billionaire investor boosts his stake to nearly 10 percent, the company borrows $2 billion that will go partly for a special dividend.
Stephen TaubDecember 4, 2007

Two subsidiaries of Temple-Inland Inc. have obtained $2.14 billion in financing from a group of lenders affiliated with Citibank.

The company said it will use the proceeds to pay a special dividend of $10.25 per share, or about $1.1 billion; reduce debt by $700 million, which includes its recently announced tender offer for up to $500 million in outstanding notes; pay taxes on the sale of strategic timberlands, and for other corporate purposes.

The announcement comes less than two weeks after billionaire activist investor Carl Icahn lifted his stake in the company to 9.8 percent. Icahn in the past has frequently been a recipient of large, one-time dividends from companies whose stock he had accumulated, with Kerr-McGee being another relatively recent example.

Meanwhile, the diversified company, which manufactures corregated packaging and forest products and offers real estate and financial services, is moving closer to dividing into three separate companies.

Last week, its board approved the final terms of the previously announced spinoffs of Guaranty Financial Group and Forestar Real Estate Group. through tax-free distributions of those subsidiaries’ common stock to Temple-Inland stockholders. The distributions are expected to be made on December 28.

Under the break-up, each Temple-Inland stockholder will receive one common share of Guaranty and one common share of Forestar for every three common shares of Temple-Inland. No fractional common shares of Guaranty or Forestar will be distributed; rather, holders of fractional shares will receive cash.

Following the distributions, Temple-Inland will not own any of the common stock of Guaranty or Forestar, and each will be an independent company.

Temple-Inland said it received a ruling from the Internal Revenue Service indicating that the spin-offs will qualify as tax-free distributions.