* Navistar 'extremely disappointed' in No. 3 shareholder
* Icahn calls hiring of new CEO 'worse than ill-advised'
* Icahn says ready for proxy fight
* Navistar shares down less than 1 percent
By Scott Malone
Sept 10 Navistar International Corp
defended itself on Monday after activist investor Carl Icahn
attacked the U.S. truck and engine maker for hiring a new chief
executive officer without consulting top shareholders.
The company, whose shares fell less than 1 percent, accused
Icahn of engaging in "threats, attacks and disruptions" after he
made his criticisms public on Sunday.
Icahn, Navistar's third-largest shareholder, said the
truckmaker had not discussed the CEO switch with his firm, and
he called the hiring of former Textron Inc CEO Lewis
Campbell a "worse than ill-advised move."
The company, which makes International-brand heavy trucks as
well as school buses and recreational vehicles, dismissed
"Navistar maintains an ongoing dialogue with its
shareholders and appreciates their input and views," Navistar
said. "After a year of dialogue, we are extremely disappointed
that Mr. Icahn has chosen to pursue his unproductive tactics of
threats, attacks, and disruption."
Icahn's move came about two weeks after Navistar, which had
struggled over the past year to win U.S. regulatory approval for
a new diesel engine technology, named Campbell to replace former
CEO Daniel Ustian. The company in August dropped the new
technology, instead saying it would buy engines from Cummins Inc
and Campbell last week laid out plans to cut costs and
possibly sell off some pieces of the company.
"You have to balance the desire to have more independence on
the board, which is probably positive, with disruption to the
company, which has now started to take the right operational
actions," said Robert Wertheimer, an analyst with Vertical
Navistar shares were down nine cents at $24.67 in afternoon
trading on the New York Stock Exchange. Over the past year, they
have lost about 37 percent of their value.
PROXY BATTLE AHEAD?
Icahn, a billionaire investor known for shaking up the
management of companies, said in an open letter to Navistar's
board released late Sunday that he may take his case directly to
Navistar shareholders in a proxy battle.
"I would prefer to amicably resolve this matter now, rather
than through protracted litigation and a proxy fight," Icahn
said. "However, I am sure that you have no doubt that I will
proceed with both, if necessary, to protect my investment and
the interest of all shareholders."
Icahn, who now owns a 14.5 percent stake in the company, had
threatened a proxy fight at Navistar last year but backed down
after the company agreed to begin electing directors for
one-year, rather than overlapping three-year, terms. In his
Sunday letter he called on the company to allow shareholders to
name four new directors immediately.
Navistar typically holds its shareholder meetings in
Icahn pushed last year for a merger between Navistar and
rival Oshkosh Corp, but Oshkosh shareholders voted down
an Icahn-backed slate of directors in January.
But even in defeat, Icahn can have an influence on how
companies are run, observers said.
"Even when Icahn and his ilk can't get the votes they need
to change the board, what they often is accomplish is waking up
the company," said Erik Gordon, a business professor at the
University of Michigan, who studies takeovers. "The fact that he
can threaten a proxy battle or wage a proxy battle often leads
to fairly substantial changes at a company."
More than half of Navistar's stock is in the hands of three
MHR Fund Management, an activist fund run by former Icahn
adviser Mark Rachesky, has amassed a 14.99 percent stake in the
company, just below the 15 percent level that would trigger the
poison pill defense that the Navistar board adopted in June.
Navistar's largest shareholder is Franklin Resources Inc
, which has a 16.3 percent stake it amassed before the
company adopted its poison-pill defense.
Gimme Credit senior analyst Vicki Bryan said Icahn's actions
could start a public dialogue that might attract similar support
from Navistar's other major shareholders.
'OUTRAGEOUS' MOVE, ICAHN COMPLAINS
Campbell, who replaced ousted CEO Ustian on Aug. 27, held
his first major conference call with shareholders last Thursday,
saying the Lisle, Illinois-based company was starting a
cost-cutting campaign and would consider selling smaller parts
of its business and it looks to return to long-term
Investors sent Navistar shares up nearly 20 percent last
Thursday, on a day the company said it would have lost $100
million in the latest quarter without a one-time gain related to
its tax rate.
"Campbell showed broad, early knowledge of company
structure, direction, and improvements needed for Navistar
turnaround," R.W. Baird analyst David Leiker said. "He voiced
confidence in ability to execute objectives and exudes a sense
of urgency within the organization."
Icahn said Navistar's board should have consulted
shareholders before naming a new CEO.
"It is therefore outrageous that you have not reached out to
obtain our opinion (and I assume you have not obtained the
opinions of the other large holders) on issues such as choosing
a new management team to lead this company," Icahn wrote.