MHR Fund becomes largest Navistar shareholder

Fri Jun 15, 2012 10:01am EDT

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(Reuters) - MHR Fund Management LLC said Friday it has a 13.6 percent stake in Navistar International Inc (NAV.N), making it the largest shareholder in the U.S. truck and engine maker, and putting it ahead of the 11.9 percent stake of investor Carl Icahn.

MHR, founded by Mark Rachesky, a former associate of activist investor Icahn, now holds 9.4 million shares in the troubled company, bought May 22 through June 13, it said in a filing with the U.S. Securities and Exchange Commission.

That makes it the biggest investor in Navistar, based on current Reuters data.

Navistar shares leapt 11.2 percent to $30.95 in early trading Friday on the New York Stock Exchange.

MHR built its position as Navistar hit fresh three-years lows in the wake of an unexpected quarterly loss, and news that a U.S. appeals court would no longer allow it to pay fines to get around curbs on selling diesel truck engines that don't meet U.S. pollution standards.

In the filing, New York-based MHR said it "may seek to engage in discussions with (the) management and others concerning the business and operations of the company."

Navistar declined to comment on the news. Rachesky wasn't immediately available to comment.

Rachesky, who worked for billionaire investor Carl Icahn before co-founding MHR, has previously invested in Lions Gate Entertainment Corp (LGF.N). He is also the chairman of Leap Wireless International Inc LEAP.O.

Last week, Icahn raised his stake in Navistar to 11.9 percent from about 10 percent, taking advantage of a sharp drop in the stock price triggered by weak results.

Trading in Navistar shares has been volatile over the past two weeks, plunging as much as 28 percent on June 7 after news of the quarterly loss, then recovering a day later when Icahn raised his stake, and after Fiat Industrial FI.MI Chairman Sergio Marchionne hinted he was keen on the company.

Late last year, Icahn launched a drive to merge Navistar with rival Oshkosh Truck Corp (OSK.N), in which he holds a 10 percent stake. Navistar Chief Executive Daniel Ustian was open to the idea, but Oshkosh shareholders and management beat it back, voting down an Icahn-nominated slate of directors at the company's January annual meeting.

Analysts have said there could be obstacles to a foreign company buying Navistar, since it also makes military vehicles.

Navistar shares have lost almost half their value over the past 12 months, while Oshkosh has fallen 22 percent. Both slumps are far deeper than the 3 percent decline of the Standard & Poor's capital goods industry index. .GSPIC

(Additional reporting by A. Ananthalakshmi in Bangalore. Editing by Bernadette Baum)

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