Icahn Enterprises L.P. (“Icahn Enterprises”) is a master limited
partnership formed in Delaware on February 17, 1987. Icahn Enterprises Holdings
L.P. (“Icahn Enterprises Holdings”) is a limited partnership formed
in Delaware on February 17, 1987. References to "we," "our"
or "us" herein include both Icahn Enterprises and Icahn Enterprises
Holdings and their subsidiaries, unless the context otherwise requires.
Icahn Enterprises owns a 99% limited partner interest in Icahn Enterprises Holdings.
Icahn Enterprises G.P. Inc. (“Icahn Enterprises GP”), which is indirectly
owned and controlled by Mr. Carl C. Icahn, owns a 1% general partner interest
in each of Icahn Enterprises and Icahn Enterprises Holdings as of December 31,
2016. Icahn Enterprises Holdings and its subsidiaries own substantially all
of our assets and liabilities and conduct substantially all of our operations.
Mr. Icahns estate has been designed to assure the stability and continuation
of Icahn Enterprises with no need to monetize his interests for estate tax or
other purposes. In the event of Mr. Icahns death, control of Mr. Icahns interests
in Icahn Enterprises and its general partner will be placed in charitable and
other trusts under the control of senior Icahn Enterprises executives and family
members.
Automotive
Background
We conduct our Automotive segment through our wholly owned subsidiaries Federal-Mogul
Holdings LLC ("Federal-Mogul"), IEH Auto Parts Holding LLC ("IEH
Auto"), effective June 1, 2015, and Pep Boys - Manny, Moe and Jack ("Pep
Boys"), effective February 3, 2016.
Prior to its conversion to a Delaware limited liability company on February
14, 2017, Federal-Mogul, previously known as Federal-Mogul Holdings Corporation,
was organized in Delaware as a corporation. Federal-Mogul became a wholly owned
subsidiary of ours effective January 23, 2017, as discussed below. Prior to
January 23, 2017, Federal-Mogul was a majority owned subsidiary of ours with
publicly traded common stock and as of December 31, 2016, we owned approximately
82.0% of the outstanding common stock of Federal-Mogul.
On September 6, 2016, we entered into an agreement and plan of merger with
Federal-Mogul pursuant to which, and upon the terms and subject to the conditions
thereof, we commenced a cash tender offer (the "Federal-Mogul Tender Offer")
to acquire all of the issued and outstanding shares of Federal-Mogul’s
common stock not already owned by us for a purchase price of $9.25 per share,
net to the seller in cash, without interest, less any applicable tax withholding.
The Federal-Mogul Tender Offer was subsequently extended to January 18, 2017
and the purchase price per share was subsequently increased to $10.00 per share.
On January 23, 2017, we paid for the shares validly tendered in the Federal-Mogul
Tender Offer and effected a short form merger as the second and final step of
the acquisition.
On February 3, 2016, pursuant to a tender offer, we acquired a majority of the
outstanding shares of Pep Boys and on February 4, 2016, we acquired the remaining
outstanding shares of Pep Boys. The primary reasons for the acquisition of Pep
Boys were to add new product lines to our Automotive segment, to provide operating
synergies, to strengthen distribution channels and to enhance our Automotive
segments ability to better service its customers. The total value for the acquisition
of Pep Boys was approximately $1.2 billion, including the fair value of our
equity interest in Pep Boys just prior to our acquisition of a controlling interest.
On June 1, 2015, our wholly owned subsidiary, IEH Auto, acquired substantially
all of the auto parts assets in the United States of Uni-Select, Inc., a leading
automotive parts distributor for domestic and imported vehicles.
Federal-Mogul is operated independently from IEH Auto and Pep Boys. Pep Boys
and IEH Auto are being operated together under their parent company and wholly
owned subsidiary of ours, IEP Auto Holdings LLC.
Business
Federal-Mogul
Federal-Mogul is a leading global supplier of technology and innovation in vehicle
and industrial products for fuel economy, emissions reduction and safety systems.
Federal-Mogul serves original equipment manufacturers (“OEM”) and
servicers (“OES”) (collectively “OE”) of automotive,
light, medium and heavy-duty commercial vehicles, off-road, agricultural, marine,
rail, aerospace, power generation and industrial equipment, as well as the global
aftermarket. Federal-Mogul seeks to participate in both of these markets by
leveraging its original equipment product engineering and development capability,
manufacturing know-how, and expertise in managing a broad and deep range of
replacement parts to service the aftermarket. Federal-Mogul is a leading technology
supplier and a market share leader in several product categories. As of December
31, 2016, Federal-Mogul had current OEM products included on more than 400 global
vehicle platforms and more than 800 global powertrains used in light, medium
and heavy-duty vehicles. Federal-Mogul offers premium brands, OE replacement
and entry/mid level products for all aftermarket customers. Therefore, Federal-Mogul
can be first to the aftermarket with new products, service expertise and customer
support.
Federal-Mogul operates with two end-customer focused businesses. The Powertrain
business focuses on original equipment powertrain products for automotive, heavy-duty
and industrial applications. The Motorparts business sells and distributes a
broad portfolio of products in the global aftermarket and also serves original
equipment manufacturers with products including braking, wipers and a limited
range of components. This organizational model allows for a strong product line
focus benefiting both original equipment and aftermarket customers and enables
Federal-Mogul to be responsive to customers’ needs for superior products
and to promote greater identification with Federal-Mogul premium brands. Additionally,
this organizational model enhances management focus to capitalize on opportunities
for organic or acquisition growth, profit improvement, capital allocation and
business model optimization in line with the unique requirements of the two
different customer bases and business models.
Energy
We conduct our Energy segment through our majority ownership in CVR. We acquired
a controlling interest in CVR on May 4, 2012.
CVR is a diversified holding company primarily engaged in the petroleum refining
and nitrogen fertilizer manufacturing industries through its holdings in CVR
Refining, LP (“CVR Refining”) and CVR Partners, LP (“CVR Partners”),
respectively. CVR Refining is an independent petroleum refiner and marketer
of high value transportation fuels. CVR Partners produces nitrogen fertilizers
in the form of urea ammonium nitrate ("UAN") and ammonia. As of December
31, 2016, CVR owned 100% of the general partners of CVR Refining and CVR Partners
and approximately 66% of the outstanding common units of CVR Refining and 34%
of the outstanding common units of CVR Partners.
On August 2, 2016, we sold 250,000 common units of CVR Refining. As a result
of this transaction, we and our affiliates collectively own 69.99% of CVR. Pursuant
to CVR Refining’s partnership agreement, in certain circumstances, the
general partner of CVR Refining has the right to purchase all, but not less
than all, of CVR Refinings common units held by unaffiliated unit holders at
a price not less than their then-current market price, as calculated pursuant
to the terms of such partnership agreement (the “Call Right”). Pursuant
to the terms of the partnership agreement, because our holdings were reduced
to less than 70.0%, the ownership threshold for the application of such Call
Right was permanently reduced from 95% to 80%. Accordingly, if at any time the
general partner of CVR Refining and its affiliates owns more than 80% of CVR
Refinings common units, it will have the right, but not the obligation, to
exercise such Call Right.
CVR is a reporting company under the Exchange Act and files annual, quarterly
and current reports, proxy statements and other information with the SEC that
are publicly available.
Petroleum Business
The petroleum business consists of our and CVRs interest in CVR Refining.
CVRs petroleum business includes a 115,000 barrels per calendar day ("bpcd")
rated capacity complex full coking medium-sour crude oil refinery in Coffeyville,
Kansas and a 70,000 bpcd rated capacity complex crude oil refinery in Wynnewood,
Oklahoma. The combined crude capacity represents approximately 22% of the regions
refining capacity. The Coffeyville refinery located in southeast Kansas is approximately
100 miles from Cushing, Oklahoma ("Cushing"), a major crude oil trading
and storage hub. The Wynnewood refinery is located approximately 65 miles south
of Oklahoma City, Oklahoma and approximately 130 miles from Cushing.
The petroleum business also includes the following auxiliary operating assets:
Crude Oil Gathering System. The petroleum business owns and operates a crude
oil gathering system serving Kansas, Nebraska, Oklahoma, Missouri, Colorado
and Texas. The gathering system includes approximately 340 miles of active owned
and leased pipelines and approximately 150 crude oil transports and associated
storage facilities, which allows it to gather crude oils from independent crude
oil producers. The crude oil gathering system has a gathering capacity of over
70,000 barrels per day ("bpd"). Gathered crude oil provides an attractive
and competitive base supply of crude oil for the Coffeyville and Wynnewood refineries.
During 2016, the petroleum business gathered an average of approximately 71,000
bpd.
Pipelines and Storage Tanks. The petroleum business owns a proprietary pipeline
system capable of transporting approximately 170,000 bpd of crude oil from its
Broome Station facility located near Caney, Kansas to its Coffeyville refinery.
Crude oils sourced outside of the proprietary gathering system are delivered
by common carrier pipelines into various terminals in Cushing, where they are
blended and then delivered to the Broome
Station tank farm via a pipeline owned by Plains Pipeline L.P. ("Plains").
The petroleum business owns approximately (i) 1.5 million barrels of crude oil
storage capacity that supports the gathering system and the Coffeyville refinery,
(ii) 0.9 million barrels of crude oil storage capacity at the Wynnewood refinery
and (iii) 1.5 million barrels of crude oil storage capacity in Cushing. The
petroleum business also leases additional crude oil storage capacity of approximately
(iv) 2.2 million barrels in Cushing, (v) 0.2 million barrels in Duncan, Oklahoma
and (vi) 0.1 million barrels at the Wynnewood refinery. In addition to crude
oil storage, the petroleum business owns over 4.5 million barrels of combined
refined products and feedstocks storage capacity.
Nitrogen Fertilizer Business
CVRs nitrogen fertilizer business consists of two nitrogen fertilizer manufacturing
facilities which are located in Coffeyville, Kansas and East Dubuque, Illinois.
The nitrogen fertilizer business produces and distributes nitrogen fertilizer
products, which are used primarily by farmers to improve the yield and quality
of their crops. The principal products are UAN and ammonia, and all products
are sold on a wholesale basis. The East Dubuque facility has the flexibility
to vary its product mix enabling the East Dubuque facility to upgrade a portion
of its ammonia production into varying amounts of UAN, nitric acid and liquid
and granulated urea each season, depending on market demand, pricing and storage
availability. The East Dubuque facilitys product sales are heavily weighted
toward sales of ammonia and UAN.
Coffeyville nitrogen fertilizer plant.
The East Dubuque facility uses natural gas to produce nitrogen fertilizer, primarily
ammonia and UAN. The East Dubuque facility is able to purchase natural gas at
competitive prices due to the plant’s connection to the Northern Natural
Gas interstate pipeline system, which is within one mile of the facility, and
the ANR Pipeline Company pipeline. The pipelines are connected to Nicor Inc.’s
distribution system at the Chicago Citygate receipt point and at the Hampshire
interconnect, respectively, from which natural gas is transported to the facility.
Though the East Dubuque facility does not typically purchase natural gas for
the purpose of resale, it may occasionally sell natural gas when purchase commitments
exceed production requirements and/or storage capacities, or when the margin
from selling natural gas significantly exceeds the margin from producing additional
ammonia. The East Dubuque nitrogen fertilizer facility’s receipt point
locations and access to the Chicago Citygate receipt point has allowed it to
obtain relatively favorable natural gas prices for sales of excess natural gas
due to its proximity to the stable residential demand for the commodity in Chicago,
Illinois.
Railcar
We conduct our Railcar segment through our majority ownership interests in American
Railcar Industries, Inc. ("ARI") and our wholly owned subsidiary American
Railcar Leasing, LLC ("ARL"). As of December 31, 2016, we owned approximately
62.2% of the total outstanding common stock of ARI.
Prior to February 29, 2016, we owned a 75% economic interest in ARL. On February
29, 2016, Icahn Enterprises entered into a contribution agreement with an affiliate
of Mr. Icahn, to acquire the remaining 25% economic interest in ARL not already
owned by us. Pursuant to this contribution agreement, we contributed 685,367
newly issued depositary units of Icahn Enterprises in exchange for the remaining
25% economic interest in ARL. As a result of the transaction, we own a 100%
economic interest in ARL. This transaction was authorized by the independent
committee of the board of directors of the general partner of Icahn Enterprises.
The independent committee was advised by independent counsel and retained an
independent financial advisor which rendered a fairness opinion. On October
2, 2013, we acquired the initial 75% economic interest in the newly capitalized
ARL from an affiliate of Mr. Icahn. ARL was considered an entity under common
control that required us to consolidate the financial results of ARL on an as-if-pooling
basis.
Metals
Background
We conduct our Metals segment through our indirect wholly owned subsidiary,
PSC Metals, Inc. (“PSC Metals”).
PSC Metals is principally engaged in the business of collecting, processing
and selling ferrous and non-ferrous metals, as well as the processing and distribution
of steel pipe and plate products. PSC Metals collects industrial and obsolete
scrap metal, processes it into reusable forms, and supplies the recycled metals
to its customers, including electric-arc furnace mills, integrated steel mills,
foundries, secondary smelters and metals brokers. These services are provided
through PSC Metals recycling facilities located in seven states. PSC Metals
also operates a steel products business that includes the supply of secondary
plate and structural grade pipe that is sold into niche markets for counterweights,
piling and foundations, construction materials and infrastructure end-markets.
Mining
Background
We conduct our Mining segment through our majority ownership in Ferrous Resources
Ltd ("Ferrous Resources"). As discussed below, we obtained control
of and consolidated the results of Ferrous Resources during the second quarter
of 2015.
Ferrous Resources acquired certain rights to iron ore mineral resources in Brazil
and develops mining operations and related infrastructure to produce and sell
iron ore products to the global steel industry. Ferrous Resources has acquired
significant iron ore assets in the State of Minas Gerais, Brazil, known as Viga,
Viga Norte, Esperança, Serrinha and Santanense. In addition, Ferrous
Resources has acquired certain mineral rights near Jacuípe in the State
of Bahia, Brazil. Of the assets acquired, Viga, Esperança and Santanense
are already extracting and producing iron ore, while the other assets are at
an early stage of exploration.
In response to the depressed iron ore price environment, Ferrous Resources decided
to temporarily suspend Esperanças and Santanenses operations in the
first quarter of 2015 in order to study alternatives to further reduce cost
of production and improve product quality and therefore to improve profitability
and margin per metric ton.
On December 19, 2016, Icahn Enterprises entered into a definitive agreement
to sell ARL to SMBC Rail Services LLC ("SMBC Rail"), a wholly owned
subsidiary of Sumitomo Mitsui Banking Corporation, for cash based on (i) a value
approximately $2.8 billion (subject to certain adjustments) and (ii) a fleet
of approximately 29,000 railcars. The initial closing is expected to occur in
the second quarter of 2017. For a period of three years thereafter, upon satisfaction
of certain conditions, the sellers will have an option to sell, and SMBC Rail
will have an option to buy, approximately 4,800 additional railcars. These approximately
4,800 railcars will be segregated and owned by a wholly owned subsidiary of
ours. If the conditions to the option are satisfied, the purchase price for
the approximately 4,800 additional railcars would be approximately $586 million
at the time of the initial closing, which would bring the total sale price to
approximately $3.4 billion (subject to certain adjustments). The sale is subject
to customary closing conditions. Neither the sale nor the option are subject
to any financing condition.
Federal-Mogul has manufacturing facilities and distribution centers in 24 countries
and, accordingly, Federal-Mogul’s businesses derive sales from both domestic
and international markets. The attendant risks of Federal-Mogul’s international
operations are primarily related to currency fluctuations, changes in local
economic and political conditions, extraterritorial effects of United States
laws such as the Foreign Corrupt Practices Act, and changes in laws and regulations.
Across all of our businesses, our success is based on a simple formula: we
seek to find undervalued companies in the Graham & Dodd tradition, a methodology
for valuing stocks that primarily looks for deeply depressed prices. However,
while the typical Graham & Dodd value investor purchases undervalued securities
and waits for results, we often become actively involved in the companies we
target. That activity may involve a broad range of approaches, from influencing
the management of a target to take steps to improve shareholder value, to acquiring
a controlling interest or outright ownership of the target company in order
to implement changes that we believe are required to improve its business, and
then operating and expanding that business. This activism has typically brought
about very strong returns over the years.
Today, we are a diversified holding company owning subsidiaries engaged in the
following operating businesses: Investment, Automotive, Energy, Railcar, Gaming,
Metals, Mining, Food Packaging, Real Estate and Home Fashion. As of December
31, 2016, through our Investment segment, we have significant positions in various
investments, which include American International Group, Inc. (AIG), Cheniere
Energy Inc. (LNG), Freeport McMoRan Inc. (FCX), Herbalife Ltd. (HLF), Herc Holdings,
Inc. (HRI), Hertz Global Holdings, Inc. (HTZ), Navistar International Corp.
(NAV), PayPal Holdings, Inc. (PYPL), The Manitowoc Company Inc. (MTW), Manitowoc
Foodservice Inc. (MFS) and Xerox Corporation (XRX).
Several of our operating businesses started out as investment positions in debt
or equity securities, held either directly by us or Mr. Icahn. Those positions
ultimately resulted in control or complete ownership of the target company.
For example, in 2012, we acquired a controlling interest in CVR Energy, Inc.
(‘‘CVR’’), which started out as a position in our Investment
segment and is now an operating subsidiary that comprises our Energy segment.
As of December 31, 2016, based on the closing sale price of CVR stock and distributions
since we acquired control, we had gains of approximately $1.3 billion on our
purchase of CVR. The acquisition of CVR, like our other operating subsidiaries,
reflects our opportunistic approach to value creation, through which returns
may be obtained by, among other things, promoting change through minority positions
at targeted companies in our Investment segment or by acquiring control of those
target companies that we believe we could run more profitably ourselves.
Unlike the individual investor, we have the wherewithal to purchase companies
that we feel we can operate more effectively than incumbent management. In addition,
through our Investment segment, we are in a position to pursue our activist
strategy by purchasing stock or debt positions and trying to promulgate change
through a variety of activist approaches, ranging from speaking and negotiating
with the board and CEO to proxy fights, tender offers and taking control. We
work diligently to enhance value for all shareholders and we believe that the
best way to do this is to make underperforming management teams and boards accountable
or to replace them.
The Chairman of the Board of our general partner, Carl C. Icahn, has been an
activist investor since 1980. Mr. Icahn believes that the current environment
continues to be conducive to activism. Many major companies have substantial
amounts of cash. We believe that they are hoarding cash, rather than spending
it, because they do not believe investments in their business will translate
to earnings.
We believe that one of the best ways for many cash-rich companies to achieve
increased earnings is to use their large amounts of excess cash, together with
advantageous borrowing opportunities, to purchase other companies in their industries
and take advantage of the meaningful synergies that could result. In our opinion,
the CEOs and Boards of Directors of undervalued companies that would be acquisition
targets are the major road blocks to this logical use of assets to increase
value, because we believe those CEOs and Boards are not willing to give up their
power and perquisites, even if they have done a poor job in administering the
companies they have been running. In addition, acquirers are often unwilling
to undertake the arduous task of launching a hostile campaign. This is precisely
the situation in which we believe a strong activist catalyst is necessary.
We believe that the activist catalyst adds value because, for companies with
strong balance sheets, acquisitions of their weaker industry rivals is often
extremely compelling financially. We further believe that there are many transactions
that make economic sense, even at a large premium over market. Acquirers can
use their excess cash, that is earning a very low return, and/or borrow at the
advantageous interest rates now available, to acquire a target company. In either
case, an acquirer can add the target company’s earnings and the income
from synergies to the acquirer’s bottom line, at a relatively low cost.
But for these potential acquirers to act, the target company must be willing
to at least entertain an offer. We believe that often the activist can step
in and remove the obstacles that a target generally may seek to use to prevent
an acquisition.
The investment strategy of the General Partners is set and led by Mr. Icahn.
The Investment Funds seek to acquire securities in companies that trade at a
discount to inherent value as determined by various metrics, including replacement
cost, break-up value, cash flow and earnings power and liquidation value.
The General Partners utilize a process-oriented, research-intensive, value-based
investment approach. This approach generally involves three critical steps:
(i) fundamental credit, valuation and capital structure analysis; (ii) intense
legal and tax analysis of fulcrum issues such as litigation and regulation that
often affect valuation; and (iii) combined business valuation analysis and legal
and tax review to establish a strategy for gaining an attractive risk-adjusted
investment position. This approach focuses on exploiting market dislocations
or misjudgments that may result from market euphoria, litigation, complex contingent
liabilities, corporate malfeasance and weak corporate governance, general economic
conditions or market cycles and complex and inappropriate capital structures.
The Investment Funds are often activist investors ready to take the steps necessary
to seek to unlock value, including tender offers, proxy contests and demands
for management accountability. The Investment Funds may employ a number of strategies
and are permitted to invest across a variety of industries and types of securities,
including long and short equities, long and short bonds, bank debt and other
corporate obligations, options, swaps and other derivative instruments thereof,
risk arbitrage and capital structure arbitrage and other special situations.
The Investment Funds invest a material portion of their capital in publicly
traded equity and debt securities of companies that the General Partners believe
to be undervalued by the marketplace. The Investment Funds often take significant
positions in the companies in which they invest.
Real Estate
Background
Our Real Estate operations consist of rental real estate, property development
and associated club activities.
Our rental real estate operations consist primarily of office and industrial
properties leased to single corporate tenants. We owned 15 commercial rental
real estate properties. Historically, substantially all of our real estate assets
leased to others have been net-leased under long-term leases. With certain exceptions,
these tenants are required to pay all expenses relating to the leased property
and, therefore, we are typically not responsible for payment of expenses, including
maintenance, utilities, taxes, insurance or any capital items associated with
such properties.
Our property development operations are run primarily through Bayswater Development
LLC, a real estate investment, management and development subsidiary that focuses
primarily on the construction and sale of single-family and multi-family homes,
lots in subdivisions and planned communities and raw land for residential development.
Our New Seabury development property in Cape Cod, Massachusetts and our Grand
Harbor development property in Vero Beach, Florida include land for future residential
development of approximately 272 and 1,128 units of residential housing, respectively.
Both our developments operate golf and club operations as well. During the year
ended December 31, 2015, we sold the Oak Harbor development and operations in
Vero Beach, Florida, which was historically operated as part of the Grand Harbor
development property. Our long-term investment horizon and operational expertise
allow us to acquire properties with limited current income and complex entitlement
and development issues.
Home Fashion
Background
We conduct our Home Fashion segment through our indirect wholly owned subsidiary,
WestPoint Home LLC (“WPH”).
We acquired a controlling interest in WestPoint International, Inc. ("WPI")
out of bankruptcy during 2005. During 2011, we acquired additional shares of
WPI common stock and through a series of related transactions, became the sole
owner of WPI. Effective as of March 1, 2012, pursuant to an internal reorganization,
WestPoint Home, Inc. (a wholly owned indirect subsidiary of WPI, which had previously
comprised our Home Fashion business) merged into our newly created wholly owned
indirect subsidiary (which was formed as a Delaware limited liability company
solely for the purposes of such merger) and continued its business as a limited
liability company under the name WestPoint Home LLC. In referencing WPH, we
refer to WestPoint Home Inc. and WestPoint Home LLC interchangeably because
the business profile of our Home Fashion segments business did not change as
a result of this reorganization.
Holding Company
We seek to invest our available cash and cash equivalents in liquid investments
with a view to enhancing returns as we continue to assess further acquisitions
of, or investments in, operating businesses.
We conduct our activities in a manner so as not to be deemed an investment company
under the Investment Company Act of 1940, as amended, or the Investment Company
Act. Generally, this means that we do not invest or intend to invest in securities
as our primary business and that no more than 40% of our total assets will be
invested in investment securities as such term is defined in the Investment
Company Act. In addition, we intend to structure our investments so as to continue
to be taxed as a partnership rather than as a corporation under the applicable
publicly traded partnership rules of the Internal Revenue Code of 1986, as amended.
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