The billionaire corporate raider Carl Icahn, who is known to buy assets only to sell them at the right price, has sold his hedge-fund business to American Real Estate Partners (ACP), which is then again 90% owned by the rabble rouser himself. The sale will result in the merger of two of Carl Icahn's most important holdings. Following the merger, American Real Estate Partners will change its name to Icahn Enterprises.
The Icahn Funds were launched in November 2004 with approximately $1.0 billion in assets under management, of which $300 million was provided by Carl Icahn and his affiliated entities. Less than three years later, the Icahn Funds have grown to about $7.0 billion of committed capital, of which approximately $1.8 billion represents capital of Icahn and his affiliated entities.
Under the terms of the deal, Icahn will receive $810 million of American Real Estate's Depositary Units and is entitled to receive an additional earn-out payable of a maximum of $1.1 billion of Depositary Units, as long as the fund management business achieves net after tax earnings from 2007 through 2011 of $3.9 billion.
Icahn has also agreed to serve as Chairman of American Real Estate and CEO of the Icahn Management Entities for another five years. Icahn has also entered into a ten-year non-competition agreement.
American Real Estate intends to purchase about $700 million of limited partnership interests in Icahn Funds and will not be required to pay the 2.5% base fee or 25% cut of profits that Icahn Partners hedge fund charges its institutional and high-net-worth investors.
Icahn-controlled investment vehicle - American Real Estate Partners includes oil and gas properties, real estate, a controlling interest in WestPoint Stevens and casino properties including the Stratosphere hotel/casino in Las Vegas.
Most of the assets of American Real Estate Partners were in bankruptcy when Icahn gained control of the limited partnership. Icahn - a money maker and a money manager has turned many of the once defunct holdings as hot investment sectors.
American Real Estate Partners, which is more focused on buying, out-of favor assets, recently failed in its attempt to acquire auto-parts maker Lear Corp.(LEA)for $2.85 billion as shareholders of Lear rejected the merger proposal with American Real Estate Partners.
ACP is currently up 14.32% or $12.50 trading at $99.75 on a volume of 244,700 shares.
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