Navistar adopts poison pill

Embattled US truck and engine maker Navistar International Corp drew a line in the sand on Wednesday in its battle with activist investors by adopting a poison pill aimed at keeping outsiders from gaining more than a 15 percent stake. Navistar made the move after hedge fund MHR Fund Management LLC last week disclosed a 13.6 percent stake, an even larger position than billionaire activist investor Carl Icahn's 11.9 percent position.
Navistar shares fell 4 percent to $28.20 in morning trading on the New York Stock Exchange. The stock has been volatile this month following an unexpected quarterly loss as the company struggles to win US regulatory approval for a new generation of diesel engine. Lisle, Illinois-based Navistar plans to issue current shareholders the right to buy a new series of Navistar common shares if any investor declares a 15 percent stake or makes a tender offer that would give the investor that size stake.
"The plan is designed to deter coercive take-over tactics including the accumulation of shares in the open market or through private transactions and to prevent an acquirer from gaining control of the company without offering a fair and adequate price to all of the company's stockholders," Navistar said in a statement Wednesday, following a scheduled regular board meeting.
If the plan were triggered by an outside investor taking a 15 percent or higher stake in the company, Navistar would issue its shareholders rights that would allow them to buy new common shares in the company for a 50-percent discount - for each share held, the investor would buy $280 worth of new shares for $140. The investor who took the 15 percent stake would not have the right to buy additional shares.
The poison pill would make it easier for Navistar Chief Executive Daniel Ustian to resist outside pressure to either sell the company or change course on engine strategy, said Morningstar analyst Basili Alukos. "Once there is one enacted, it becomes a little more challenging for a company to be acquired, but if someone is willing to step up, it can lead to higher share prices," Alukos said. He cited industrial gas supplier Airgas Inc as an example of a company that used a poison pill to successfully fight off a take-over offer from rival Air Products and Chemicals Inc and saw its shares rise significantly. Airgas executives justified the poison pill - breaking with some of their largest shareholders - by saying the $70 per share offer from Air Products grossly undervalued corporate assets and growth potential.