July 15 (Reuters) - Navistar International Corp signed a new deal giving activist investors Carl Icahn and Mark Rachesky one more seat on its board, in a move that staves off a proxy contest and gives management more time to turn around the struggling truck and engine maker.
Navistar shares rose as much as 10 percent after the company said it was extending the threshold of its shareholders’ rights plan to 19.99 percent from 15 percent, allowing both investors to raise their stakes.
The changes announced on Monday allow Rachesky’s MHR Fund Management LLC and Icahn to nominate two board members each. A previous deal, in effect since October, allowed them to nominate one member each, plus one director the two investors had to mutually agree to.
Navistar said board member John Pope will retire to make way for the additional nominee, retaining the total strength of the board at 10.
The new deal should allow Navistar to pursue its normal course of business for a while, Wells Fargo Securities analyst Andrew Casey wrote in a client note.
Navistar is trying to recover from a disastrous engine redesign that failed to meet environmental standards, wiped a billion dollars off its market capitalization and led to its management being replaced.
Navistar ousted long-term Chief Executive Daniel Ustian last August. The company promoted Chief Operating Officer Troy Clarke, an ex-General Motors Co executive, CEO in March.
The company appointed another former GM executive, Walter Borst, as chief financial officer in June.
The new rights plan would allow both Icahn and Marchesky to buy about 8 million more Navistar shares, an offer they are likely to take up, analysts said.
MHR Fund owned 14.92 percent of Navistar as of July 15, according to regulatory filings. Icahn had a 14.73 percent stake as of March 31.
A spokesman for Carl Icahn was not immediately available. MHR Fund Management LLC spokesman Aaron Palash declined to comment.
Navistar shares closed up nearly 10 percent at $31.99 on the New York Stock Exchange on Monday.