Icahn Target Greenbrier Falls as Investors Doubt Deal

Icahn Raises Greenbrier Bid by 10% While Setting Deadline
Carl Icahn’s American Railcar Industries Inc. sweetened a takeover bid for Greenbrier Cos. by 10 percent after the rival maker of railroad cars called the initial proposal undervalued. Photographer: Scott Eells/Bloomberg

Greenbrier Cos., the target of Carl Icahn’s American Railcar Industries Inc. takeover offer, dropped the most in seven weeks amid investor concern a sweetened bid for the railcar maker may fall through.

Greenbrier sank 12 percent to $18.16 at the close in New York, the steepest one-day drop since Nov. 1. American Railcar fell 8 percent to $33.11, the biggest decline since March 12.

American Railcar, which is 56 percent owned by Icahn, increased its bid to $22 a share from $20 and gave Greenbrier until tomorrow at 2 p.m. to accept or reject the offer. Greenbrier called the first bid “grossly” undervalued.

“The primary risk to owning the shares at this time is the possibility of a rejection of the offer by Greenbrier’s board followed by Icahn walking away,” Michael Baudendistel, an analyst with Stifel Nicolaus & Co., said in a note today in which he cut his rating on Greenbrier to hold from buy.

Icahn, who disclosed a 9.99 percent stake in Greenbrier last month, is reviving a takeover bid for the Lake Oswego-based railcar producer that he made and then called off four years ago. By combining Greenbrier and American Railcar, he would create the largest U.S. railroad-car maker, surpassing Trinity Industries Inc.

Before today, Greenbrier’s shares had jumped 48 percent since Nov. 12, the day before Icahn disclosed his stake in the company. Even with that gain, the shares had lost 15 percent this year through Dec. 19.

Greenbrier’s ‘Missteps’

Greenbrier’s shares have stumbled because the company gave a “conservative outlook” for next year and has had some “operational glitches” that affected profit margins, JB Groh, an analyst with D.A. Davidson & Co., said in an interview yesterday.

“They’ve had a couple missteps on the margin front and I think that’s frustrated people,” he said. “The peak earnings are still a couple of years away.”

If American Railcar’s $22 offer is rejected, it’s unlikely there will be another bidder, Baudendistel, the Stifel analyst, said.

“Yesterday’s offer price represents a full and fair value for the company’s shares,” Baudendistel wrote in the note. “Icahn walking away from this deal would certainly not be unprecedented.”

American Railcar said it was told by Greenbrier’s investment banker before the initial offer that $20 to $22 was an acceptable price. Greenbrier said in a statement on Dec. 18 that the $20-a-share offer “grossly undervalues” the company.

Banker’s Encouragement

“If Greenbrier’s board does not wish to proceed on this basis, we will move on to other endeavors and abandon any efforts to complete a transaction,” Icahn Enterprises LP Chief Executive Officer Daniel A. Ninivaggi said in the letter to Greenbrier CEO William Furman.

Jack Isselmann, a spokesman for Greenbrier, declined to comment on the offer.

In the letter, Ninivaggi said that Greenbrier’s investment banker “last weekend” encouraged him to make an offer and that the board would “seriously entertain” a bid of between $20 and $22. He didn’t identify the investment banker. Greenbrier said Goldman Sachs Group Inc. and Bank of America Corp. are its financial advisers.

“We would never have made the offer had we not believed that we had your support and the support of a substantial number of directors for a transaction in the price range we discussed,” Ninivaggi wrote.


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