Case ID: 296050
Solution ID: 2521
Words: 2051
Price $ 75

USX Corp Case Solution

Case Solution

A hugevaried steel and energy company is put under stress by a business raider to let go of its steel division so as to raise the price of its stocks. As a substitute to the looming spinoff, the managerial team offers to change the firm’s common stock instead into two novel groups of ‘targeted’ stock that would reflect different and individual rights against each business division’s cash flows, enabling the valuation of each business individually and more precisely via the stock market.

Excel Calculations

Steel Businesses

Comparable companies

Armco, Bethlehem Steel, Inland Steel

Industry Average

USX Consolidated

Energy Businesses

Comparable companies

Armco, Bethlehem Steel, Inland Steel

Industry Average

USX Consolidated

Questions Covered

1. In 1986, then-chairman and CEO David Roderick described USX as  possibly one of “the most restructured corporations in America.” Even so,  Carl Icahn believed that further restructuring of the company was still  necessary. In late 1990, what operating and/or strategic problems, if any,  do USX’s two main businesses still face that would warrant some form of  additional restructuring?

2. Do you think there is any merit in Carl Icahn’s claim that problems in  USX’s steel business are depressing the value of its energy business? As a  USX stockholder, how credible a spokesperson do you consider Icahn to  be on this issue?

3. Which restructuring option — Icahn’s spinoff proposal or the company’s  targeted stock proposal — will create the most value for shareholders? For  creditors? For the firm’s other stakeholders?

4. For what kind of companies is targeted stock most appropriate? Least  appropriate?

5. Should the company seriously consider any other options besides doing a  spinoff or issuing targeted stock?

6. If the company decides to go ahead with the targeted stock issue, what  specific provisions or features should the stock include to ensure maximum  value creation? How closely would you model USX’s targeted stock on  GM’s alphabet stock?