Navistar International Corp. (NAV), which ousted its chief executive officer amid an inquiry from regulators and a failed engine strategy, called billionaire investor Carl Icahn’s threat of a proxy fight “unproductive.”
Icahn yesterday raised the prospect of a proxy fight, calling the truckmaker a “poster child for abysmal business decisions and poor corporate governance,” in a letter to Navistar’s board.
Icahn is pressuring Navistar’s new management, led by former Textron Inc. (TXT) CEO Lewis Campbell, after the company had a net loss of $241 million for the first three quarters of its fiscal year. The investor said in the letter to Navistar he wants four board seats made available to shareholders “immediately” and that he’d proceed with “protracted litigation and a proxy fight” if necessary to protect his investment.
The truck- and engine-maker ousted Dan Ustian as CEO after an inquiry from regulators and reversed course on an engine strategy that had prevented it from meeting 2010 federal emission standards. Icahn, who holds 14.9 percent of Navistar, said large shareholders weren’t consulted about management changes, including Ustian’s departure, made last month. Navistar’s four largest shareholders hold about 50 percent of the shares, according to data compiled by Bloomberg.
“It would be a simple matter for this board to discuss and reach a consensus regarding important decisions concerning the company that WE own,” Icahn said in the letter to Navistar. “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.”
Companies are restricted from disclosing material information to certain shareholders without also providing that information publicly, said Charles Elson, who is director of the John L. Weinberg Center for Corporate Governance at the University of Delaware.
“If Icahn wanted to discuss his concerns to the board, that’s fine,” Elson said. “But if they start to tell him material things, that becomes a disclosure issue.”
The role of the board is to make management decisions and investors have recourse to change board members if they aren’t happy with the decision, he said.
Icahn didn’t immediately return a telephone message left with Susan Gordon, his assistant.
Navistar said in a statement today it has “an ongoing dialogue with its shareholders” and that its board “takes its fiduciary duties very seriously and is committed to acting in the best interest of the company and all of its shareholders.” The response said Icahn “has chosen to pursue his unproductive tactics of threats, attacks, and disruption.”
Navistar’s truck, engine and parts unit in North America is its primary business, Campbell said on a conference call last week. The company is reviewing “non-core” units, he said. The truckmaker also produces Monaco recreational vehicles, International school buses and military vehicles.
The company withdrew its 2012 forecast Aug. 2 after disclosing a U.S. Securities and Exchange Commission inquiry. On Aug. 27, the company said Ustian had stepped down “effective immediately.” The company named Campbell executive chairman and interim chief executive officer.
Navistar gained 18 percent on June 8, after Icahn boosted in his stake in the truckmaker to 11.9 percent from 10.6 percent at the end of March. Hedge-fund manager Mark Rachesky also holds 14.98 percent of Navistar, according to data compiled by Bloomberg. The company’s board adopted a poison pill in June to help fend off hostile bids.
Icahn last November agreed to not seek nominees to Navistar’s board this year. Navistar agreed to start electing directors on an annual basis.
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