October 8, 2012 11:50 pm

Navistar ends war of words with Icahn

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Navistar International, one of the largest US truckmakers, has agreed to appoint three directors nominated by the activist investors Carl Icahn and Mark Rachesky, avoiding a public battle for shareholder support over the company’s direction.

The move by the struggling manufacturer is likely to give management more time to turn the group round by neutralising pressure for a quick sale or break-up.

Mr Rachesky will join the board immediately along with Vincent Intrieri, a representative of Mr Icahn. The pair will replace two directors who have agreed to retire, Eugenio Clariond and Steven Klinger. Mr Icahn and Mr Rachesky will then choose a third person to join the board of 10 directors.

In return the two investors have agreed not to nominate an alternative slate of board members at next year’s shareholder meeting, as well as other provisions that will be disclosed in a regulatory filing on Tuesday, the company said.

It ends an escalating war of words between the company and Mr Icahn, who owns almost 15 per cent of Navistar and had asked for four board seats for shareholders. In a public letter last month Mr Icahn accused the board of being “asleep at the switch” for the past three years. The board said that he was mounting a campaign of “threats, attacks and disruption”.

His letter followed the August disclosure by Navistar that it was the subject of an investigation by the Securities and Exchange Commission into “accounting and disclosure matters”. Shares in the group are also down more than two-thirds from their 2011 peak, as Navistar has struggled to win approval for a proprietary clean emissions technology.

However, peace had broken out on Monday. Lewis Campbell, Navistar chairman and chief executive, said of the new board members that “we welcome their insights and look forward to working with them constructively”.

Mr Icahn said he was “glad to have reached an agreement that provides strong shareholder representation”.

The move also suggests that for now the investors intend to back management’s plan, announced last month, to discard peripheral assets, cut costs and fix the truck business. An underfunded pension scheme also presents a challenge to a rapid sale of the business.

Shares in Navistar closed up 7.5 per cent at $22.81 in New York, and continued to gain in after-hours trading.

Much of Navistar’s struggles relate to its decision to develop alternative technology to meet stricter US emissions standards at a cost of more than $700m.

That approach failed to meet clean emissions rules and Navistar has now adopted the technology used by its competitors, which uses liquid urea to cut nitrogen oxide emissions.

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