December 19, 2012 / 9:15 PM / in 5 years

Exclusive: American Railcar sweetens offer for Greenbrier

(Reuters) - American Railcar Industries Inc (ARII.O), controlled by activist investor Carl Icahn, said it was willing to raise its offer for Greenbrier Cos Inc (GBX.N) after being snubbed by the smaller railcar maker.

American Railcar said it could increase its offer by 10 percent to $22 per share, valuing Greenbrier at $597 million.

But a deal at that price is unlikely as Greenbrier has already deemed such an offer inadequate in its response to American Railcar’s first bid, which revived Icahn’s five-year old plan to merge the companies.

“The Greenbrier board of directors believes a price range of $20-$22 per share is inadequate, grossly undervalues the company and is not in the best interests of Greenbrier stockholders,” the company said in a statement late on Tuesday.

American Railcar’s shares were down 5 percent, while Greenbrier was quoted at $20.61 in after-market trading, indicating that investors were skeptical of a deal going through.

An offer price of between $23 and $26 per share would still add meaningfully to American Railcar’s earnings, Longbow Research analyst Matthew Brooklier wrote in a client note.

American Railcar's offer, however, is at a discount to the $30-range Greenbrier shares were trading at when Icahn attempted to merge the companies in 2008. He dropped the bid later that year, saying a combination was not possible due to "unresolved issues". (


While rejecting American Railcar’s initial offer of $20 per share, Greenbrier said it had repeatedly told Icahn that it would be interested in buying American Railcar for a ”modest premium.

The company said it was willing to continue talks with Icahn, and that combining the two rivals would offer substantial synergies and benefit shareholders.

Greenbrier did not say what it would consider a fair price for the company. The company did not respond to calls seeking a comment.

American Railcar’s second-largest shareholder, Advisory Research, said it would be interested in selling its shares to Greenbrier if it got a “compelling” offer.

    “With the appropriate acquisition premium you’d have to get (an offer) above the mid $40‘s,” said Matthew Swaim, the managing director of the firm, which has an 8.6 percent stake in American Railcar.

    American Railcar’s intrinsic value is $54.47 as measured by Thomson Reuters StarMine. The StarMine model is a measure of how much a stock should be worth currently when considering expected growth rates over the next 15 years adjusting for analysts’ systematic biases.

    Icahn Enterprises LP (IEP.O) controls around 55.6 percent of American Railcar, according to its most recent filing. The company has a market capitalization of about $734 million.

    Greenbrier grew rapidly in 2011 when strong demand in the energy sector increased deliveries nearly fourfold. But energy demand has since moderated and the company’s growth has slowed.

    It reported in November a quarterly profit that was less than half of what analysts had expected.

    Icahn reported a 9.99 percent stake in Greenbrier last month, making him its largest shareholder, and Greenbrier shares have risen more than 30 percent since then.

    American Railcar said on Wednesday it would terminate its offer if Greenbrier did not respond by 2 pm Eastern Time on December 21.

    Reporting by Tej Sapru and Sagarika Jaisinghani in Bangalore; Editing by Muralikumar Anantharaman, Chris Gallagher and Saumyadeb Chakrabarty

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