Industry Reports

Deutsche Bank Reports Summaries

070219 Deutsche Bank Report - Icahn Filing

Deutsche Bank - Equity Research

Temple-Inland {Ticker: TIN.N, Closing Price: USD 53.16, Target Price: USD 55.00, Recommendation: Buy}.

* Icahn seeks board seats at TIN

In 2 prior instances, Icahn had built positions in TIN, created a stir, and then quietly slipped away.  Would this time be different? 

On Friday, Icahn filed a slate of four candidates for Temple's Board of Directors.  Icahn himself is not among the candidates.   

* Icahn's challenge is against vertical integration This again draws attention to the efficiency & financial logic of the

vertically-integrated forest products company.   With most companies having abandoned this model, the debate now centers on Temple and Weyerhaeuser.  In Temple's case, the issue is broadened by the presence of Temple-Inland Financial Services and Temple's growing real estate development operations.

* We expect a spirited battle

We don't expect Temple's management to be cowered by Carl Icahn.  Moreover, Temple's performance over the past 3-4 yrs has been impressive and provides tangible partial response to Icahn's challenge.  TIN's margins have risen smartly relative to its peer group and management has established a track record of returning cash to shareholders.

* Valuation/Risks

Our price target is based primarily on TIN's very high net asset value.  We have set a price target well below our asset value to account for near term cyclical pressures in TIN's primary businesses.  Like any paper company, Temple-Inland's primary risk is that the economy stalls, putting renewed pressure on commodity prices. Other common industry risks include a reversal in the decline of the US dollar, capacity growth abroad, and higher energy costs. Because of its financial services business, Temple-Inland also faces other risks including higher interest rates, a slowing housing market, and credit defaults.