Navistar Hears More Bluster from Icahn

Carl Icahn has fired off a letter to the board of directors of Navistar International calling on the directors to make four board seats available to shareholders immediately. But it has not received a welcoming response from either investors or the maker of trucks and engines. And Icahn’s move comes too late to satisfy some hedge funds.

In his letter, Icahn warns that while he would prefer to resolve the matter without litigation and a proxy fight, he said he would proceed with both if necessary. Icahn, who owns 15 percent of the company, said he will seek access to corporate documents and board proceedings at the company.

But so far, investors aren’t convinced that Icahn will do much good for them.

Shares of Navistar were down in early afternoon trading yesterday by more than 2 percent, to about $24.23. The stock traded as high as $48.18 back in February.

Navistar responded to the activist’s assertions with a letter released Monday morning saying it is “extremely disappointed” that Icahn has chosen to pursue “unproductive tactics of threats, attacks and disruption rather than continuing constructive engagement.” It added that the board and management have “a clear path forward and are focused on executing on their plan and delivering value to shareholders.”

Navistar has not exactly delivered value recently. Its stock is down 60 percent over the past five years.

In late August, however, Navistar announced a major management shake-up, replacing Daniel Ustian, chairman, president and CEO, on an interim basis with Lewis Campbell, former chairman, president and CEO of Textron.

And in early September the company announced it was reviewing all of its noncore businesses. This was only two months after announcing that it planned to introduce its next generation of engines designed to meet new emissions regulations in advance of 2014 and 2017 regulations.

But Icahn is miffed that the board did not discuss key decisions with him in advance. He called the choice of Campbell “worse than ill-advised,” stressing the firm “made no attempt to discuss the decision with us or presumably any of the other substantial holders.”

Icahn also criticized the company for introducing a poison pill, which makes it prohibitively expensive for an unwanted suitor to complete a hostile takeover.

He wrote that the management change shows that the board is “asleep at the switch, violating its legal obligations and trying to entrench itself to protect the fees and status of board members.”

In its statement, Navistar asserted it maintains “an ongoing dialogue with its shareholders.”

The latest back-and-forth follows Icahn’s disclosure last October that he owned 9.8 percent of Navistar’s stock and a regulatory filing at the time in which he contended that the stock was undervalued, that he had had conversations with management and that he would seek additional conversations to discuss Navistar’s business and strategies. He also said he had discussed the possibility of adding several of his representatives to the board.

Icahn subsequently agreed not to seek a board seat when the company agreed to hold annual elections for all of its directors instead of on a staggered basis.

At the time the stock was trading at about $40.

Since then, a number of high-profile investors seem to have lost their patience — or faith — in Icahn.

In the second quarter Jeffrey Altman’s Owl Creek Asset Management dumped its entire three-million-share stake, while Citadel, Two Sigma Investments, Marathon Asset Management and Renaissance Technologies each cleaned out their holdings, ranging from roughly 500,000 shares to 750,000 shares.