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Icahn Exits, Family Dollar Considers Rival Bids

Courtesy of Carl Icahn's Twitter page

The future of Family Dollar is uncertain—it’s in the midst of a bidding war as its board of directors decides whether to sell the company to Dollar Tree or Dollar General. But this much is certain: The billionaire investor who helped spur this pending ownership change is now cashing in.

Rewind to June: Family Dollar’s earnings are sluggish, stock is stagnant, and competitors are pulling away. Carl Icahn thunders in; the 78-year-old activist investor buys more than $150 million of the company’s stock and options, demands a change in leadership, and threatens to attempt a hostile takeover.

Fast forward to present: Family Dollar is trading at an all-time high, $80 per share, and fielding offers from its two chief rivals. And Icahn is out.

"This is classic Carl Icahn—[find a] deeply undervalued company with an ugly looking business that he can buy and create an event. And that event was the sale," says Tobias Carlisle, managing director of Eyquem Investment Management and the author of "Deep Value: Why Activist Investors and Other Contrarians Battle for Control of Losing Corporations."

“That’s his bread and butter: buy a position, catalyze an event, catalyze the stock price,” says Carlisle.

Icahn bought the stock in the $58 range, drummed up interest, and sold in the $80 range. Sticking around to see where the company will end up or if the price will hold is outside his M.O., Carlisle says.

He leaves Family Dollar in a chaotic but profitable position. The company has agreed to sell to smaller rival Dollar Tree for $8.5 billion. But the largest chain, Dollar General, upped its bid to more than $9 billion yesterday. Family Dollar executives say they are reviewing the offer.