This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

The Deal: Navistar Extends Truce With Activists

NEW YORK ( The Deal) -- Navistar International Corp. (NAV) said Monday it has amended its agreement with activists Carl Icahn and Mark Rachesky, buying more time as the struggling truckmaker tries to retool its business and reverse losses.

Lisle, Ill.-based Navistar said that under the terms of the new agreement Icahn Partners LP and Rachesky's MHR Fund Management LLC can name a fourth representative to its board. The Navistar board has also approved an amendment to its poison pill plan that extends the provision to June 18, 2015, instead of August 2013, and increases the amount of beneficial ownership of common stock without triggering the rights plan from 15% to 19.99%.

In return, Icahn and Rachesky have agreed not to run a proxy contest at Navistar's planned February 2014 annual meeting. As part of the deal current director John C. Pope has retired from the board, creating a slot that the investors will fill by the February 2014 meeting.

Navistar has been floundering in recent years due to problems stemming from its 2001 decision to invest more than $700 million in an ambitious, but so far not viable, technology designed to meet higher emission standards. It has announced six consecutive quarterly losses due to tepid sales and high warranty expenses relating to its troubled engine design.

The company in October 2012 averted a potential proxy fight with Icahn and Rachesky with an initial agreement that gave the investors three seats on the board. Navistar has also replaced CEO Dan Ustian and other members of management, shed assets and is in the process of revamping its operations.

Current CEO Troy Clarke in a statement said "we view the updated agreements with Icahn Partners and MHR, as well as the amendment to the rights plan, as positive steps as we continue to execute our turnaround plan and drive the company to restored profitability."

Shares of Navistar traded up more than 8%, or $2.35, to $31.54 on Monday afternoon, but analysts don't expect any quick action from the company following the amended agreement.

Extending the truce seemingly benefits both the company and the activists by giving Navistar's new management more time to overhaul the business. Industry sources have said for some time now that they believe Navistar would be open to a sale, but is at present an undesirable target due to its struggles and continued uncertainty about its future.

Gimme Credit senior high yield analyst Vicki Bryan noted that Icahn and Rachesky both took the bulk of their stakes prior to Navistar's July 2012 announcement that it was abandoning its new engine tech, and are likely underwater on their investments.

"Clearly these holders bought most of their stakes with dramatically different expectations versus what actually developed last year, and their investments at current prices are comparatively much smaller," Bryan wrote.

Written by Lou Whiteman

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
NAVI $11.73 -1.20%
AAPL $118.03 -0.71%
FB $105.41 -0.31%
GOOG $748.82 0.07%
TSLA $229.71 5.30%


Chart of I:DJI
DOW 17,813.39 +1.20 0.01%
S&P 500 2,088.87 -0.27 -0.01%
NASDAQ 5,116.1430 +13.3350 0.26%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs