Billionaire investor Carl Icahn went hostile with his $1.73 billion bid to buy Commercial Metals Co on Tuesday, a day after the metals recycler rejected his buy-out attempt.

Icahn, who owns about a 10 percent stake in Commercial Metals, said he will start a tender offer and will require the support of at least 40 percent of the company's shareholders.

On Monday, Commercial Metals rejected the corporate raider-turned activist's $15 a share offer, saying it substantially undervalued the company and was opportunistic.

Commercial Metals' shares have failed to touch the $15 offer price since Icahn launched his bid last Monday, indicating shareholders' skepticism of the deal going through. On Tuesday, the stock was trading marginally up at $14.15.

After attempting to work with the board, we are launching this tender offer so that shareholders can decide for themselves what they wish to do with their company, Icahn said in a statement.

A Commercial Metals representative declined to comment on Icahn's latest move.

While Icahn has been largely unsuccessful this year with his proxy battles and takeover attempts, at least one analyst said Commercial Metals shareholders' could take the bait.

There's a good chance shareholders would tender their shares, said CRT Capital Group analyst Kuni Che. This (Tuesday's development) puts pressure on the board and management to take Icahn seriously.

The company had adopted a shareholders' rights plan in July to prevent Icahn from increasing his stake.

If Icahn can get another forty percent of shareholders to go with him it will look like a huge leap of faith. They can then get the poison pill removed, Che said.

Although shares of the company have dropped 16 percent this year, they still trade at 11.5 times forward earnings -- a 16 percent premium to their 10-year historical price-to-earnings ratio, according to Thomson Reuters Starmine data.

At the same time, Starmine SmartEstimate, which puts more weight on more accurate analysts, predicts a huge negative earnings surprise for the current quarter and full year.

This means investors could be drawn to the bid, even though it values the company at a slim premium to the current valuation.

(Reporting by Swetha Gopinath in Bangalore; Editing by Anil D'Silva, Saumyadeb Chakrabarty)

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