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James Li
James Li
Articles (587)  | Author's Website |

Carl Icahn Piles Into AmTrust Financial

Activist investor opposes company’s privatization plans

Carl Icahn (Trades, Portfolio) disclosed on Thursday that his firm, Icahn Enterprises LP (NASDAQ:IEP), established an activist stake in AmTrust Financial Services Inc. (NASDAQ:AFSI) according to GuruFocus real-time picks.

Icahn invested in 18,418,732 shares, or 9.38% of AmTrust’s total shares outstanding, for $13.20 per share. The investor dedicated 1.19% of his portfolio to the position.

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Guru opposes company decision to go private

AmTrust said on March 1 that it reached a definitive agreement with Evergreen Parent, an entity formed by private-equity funds managed collectively by the “Karfunkel-Zyskind family.” AmTrust CEO Barry Zyskind said in a press release that privatization allows the company to focus on long-term decisions “without the emphasis on short-term results.”

Icahn chided the decision, saying in his letter that the Karfunkel-Zyskind family is “blatantly taking advantage of AmTrust’s minority shareholders,” who should also be treated “fairly, both in terms of process and price.” Instead of a more stringent “entire fairness” standard, Icahn said that the family is taking over the business in a deferential, “business structure” standard, one that contradicts with the policy of equal treatment of minority-shareholders.

The activist investor also admonished the board of directors’ voting process, which “disenfranchises” the shareholders who have purchased shares after the April 5 record date. Icahn said he is lobbying with Delaware litigators and ensuring a fair vote.

Company background

AmTrust, a New York-based insurance company, underwrites and provides property and casualty products through its three business segments: Small Commercial Business, Specialty Risk and Extended Warranty, and Specialty Program. The company’s profitability ranks a poor 4 out of 10: although the company’s three-year revenue growth rate of 6.80% outperforms 88% of global competitors, AmTrust’s margins and returns underperform over 85% of global property and casualty insurance companies.

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See also

Icahn disclosed two sells in his first-quarter portfolio report: American International Group Inc. (NYSE:AIG) and PayPal Holdings Inc. (NASDAQ:PYPL). The investor sold 42,978,619 shares of the former for an average price of $59.09 and 8 million shares of the latter for an average price of $79.23. With these two transactions, Icahn chopped 13.9% of his portfolio in the aggregate.

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GuruFocus launched detailed industry overview pages in April, allowing users to view the median value for a wide variety of valuation and quality metrics. You can also view the top companies for a specific industry: for example, top property and casualty insurance companies include Chubb Ltd. (NYSE:CB), Progressive Corp. (NYSE:PGR), The Travelers Companies Inc. (NYSE:TRV) and Allstate Corp. (NYSE:ALL).

Disclosure: no positions.

About the author:

James Li
I am an editorial assistant and researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

Visit James Li's Website


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