Icahn Seen Driving Traton-Navistar Forward

ichan international
The insurgent’s approval apparently was critical for Volkswagen’s Traton to strike an agreement in principle to buy Navistar for $3.7 billion.

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When Navistar International Corp. (NAV) on Friday, Oct. 16, reached an agreement in principle to sell itself to Volkswagen AG’s Traton SE for a sweetened $44.50 a share, it apparently needed the approval of big investors Carl Icahn and MHR Fund Management LLC’s Mark Rachesky.

In a letter Friday, Navistar CEO Troy Clarke told Traton CEO Matthias Grundler that a proposed deal to sell Navistar for $44.50 a share has the support of both Icahn and Rachesky, who had worked for Icahn Enterprises LP in the 1990s. According to securities filings, Icahn owns 17.05% and MHR controls 16.4%.

In January, Traton made a $35 a share bid to buy Navistar, and in September the Volkswagen unit increased the offer to $43 a share. On Wednesday, however, Traton told Navistar that the $43 per share bid would lapse if it wasn’t approved by Friday.

Jeffrey Kauffman, managing director at Loop Capital, said that gaining the support of Icahn and MHR definitely made it easier to reach an agreement on price. Traton itself had some leverage, considering it owned 16.7%.

A Traton representative noted a binding commitment will need the approval of both company boards, as well as shareholder and regulatory approval.

Kauffman added that Icahn, a shareholder since 2012, has been very supportive of Navistar’s management and the truckmaker’s turnaround. However, he believed Icahn had been holding out for a higher price.

“Icahn probably wanted $50 a share,” Kauffman said. “They [Traton] are getting Navistar for a bit of a discount to what it probably would be worth in two to three years. If all the parties are a little bit unhappy, then it probably was a good deal.”

The insurgent investor was reportedly unconvinced by the $43 a share offer.

In addition, Navistar settled with Icahn in 2012 to avoid a proxy fight. In that deal, Navistar installed three new Icahn-backed directors, including Vincent Intrieri, to its board. Intreiri, who is Navistar’s co-lead independent director, had been a senior vice president at Icahn Enterprises until 2012, according to relationship mapping service BoardEx, a sister company to The Deal. Intrieri, CEO of VDA Asset Management LLC, served as a director at Icahn Enterprises between 2006 and 2012.

Rachesky holds a Navistar board seat and backs two other directors on the company’s 10-person board. Director Raymond Miller was a principal at MHR between 2011 and 2020.
Icahn appears to have done well with his investment. He bought an initial 15% Navistar stake in 2012 at prices ranging from $22.82 to $23.01 a share.

Kauffman added there are “tremendous” synergies between Navistar and Volkswagen’s Traton. He noted that both Volvo AB (VOLV), through its Mack Trucks unit, and Daimler AG (DAI), with its Freightliner Trucks, have established manufacturing presences in North America. Volkswagen’s truck and bus operations, however, don’t have a U.S. manufacturing operation.

“Volkswagen truck and bus views itself as a large global player, but they lacked a North American manufacturer,” Kauffman said. “They were facing the prospect of either buying in the market, which is what they are doing, or building themselves an established North American presence, which would be much harder and take much longer.”

The buyer and seller already have been collaborating. Traton engineers have been working in partnership with Navistar for about 2-1/2 years to develop a global truck manufacturing platform, Kauffman said.

In addition, Volkswagen is assuming Navistar’s pension liabilities.

Icahn’s office declined to comment.

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Ronald Oral
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