Carl Icahn Has More Than 8% Stake in Beverage-Can Maker Crown Holdings
Activist investor believes Crown should shed noncore units and buy back more stock
Carl Icahn has a sizable stake in Crown Holdings Inc. CCK -3.19% and believes the beverage-can maker should shed noncore units and buy back more stock, according to people familiar with the matter.
The billionaire activist investor has a stake worth about $700 million, making him the company’s second-largest holder, the people said.
Crown has a market value of roughly $8 billion after its shares have lost nearly 40% so far this year. The stock plummeted last week after Crown lowered its financial outlook, blaming macroeconomic factors including inflation, higher interest rates and currency swings.
Crown Chief Executive Timothy Donahue said on a call with analysts and investors that the company also didn’t foresee “such a sudden and sharp decline” in demand for beverage cans globally.
Crown and its larger rival, Ball Corp. BALL -3.26% , have experienced severe whiplash amid the Covid-19 pandemic. Demand for aluminum cans spiked initially in 2020, as restaurants and bars were forced to shutter and consumers stayed home to sip on their favorite alcoholic beverages, including canned cocktails, spiked seltzer and beer. Popular brands such as Liquid Death also helped fuel sales of canned water.
But more recently, companies including Crown have said consumer demand for these types of drinks has fallen steeply, leaving them with a glut of inventory. Crown said it has indefinitely postponed certain projects in the U.S., while Ball said in August it planned to shutter two of its facilities in the U.S. Ball shares are down nearly 50% for the year.
“You never like to say, we’re caught off guard, but I think we were really,” Mr. Donahue said on last week’s conference call.
The company said it expects profit margins will remain under pressure for at least the balance of 2022, as consumers curtail their spending and restaurants and retailers readjust orders.
Before the pandemic, in 2017, Crown announced a deal to acquire Signode, a specialist in transit packaging, for $3.9 billion. The deal was meant to broaden and diversify Crown’s customer base, and increase cash flow, management said at the time. But investors weren’t as convinced the acquisition was a good fit and Crown shares traded lower on that news.
Crown also runs an aerosol and food-packaging business that manufactures cans for household products and snacks.
Mr. Icahn believes the company should consider spinning off or selling these noncore assets, which also include a minority stake in a European food-can business, the people familiar with the matter said. That would allow the company to focus on the beverage-can business, which Mr. Icahn believes is undervalued and poised to grow.
The octogenarian also believes the company could buy back more stock, the people said. Crown has been buying back stock but indicated on its recent earnings call that it is watching interest rates closely to see what it will be capable of doing in the future.