Mark Rachesky's MHR Fund Joins Carl Icahn in Activist Navistar Stake ~ market folly

Friday, June 15, 2012

Mark Rachesky's MHR Fund Joins Carl Icahn in Activist Navistar Stake

Today, Mark Rachesky's activist oriented MHR Fund Management filed a Form 3, Form 4 and 13D with the SEC regarding shares of Navistar International (NAV).

Per the activist 13D filing, MHR Fund Management has disclosed a 13.6% ownership stake in Navistar with 9,335,837 shares.  This stake consists of common stock as well as numerous share forward transactions (right to buy) with various counterparties. 

The filing was made due to activity on June 7th.  MHR started acquiring shares of NAV in the open market in late May and the bulk of their purchases came between $26-27 per share.  Their right to buy forward transactions have a price per share of $25.5399.

The 13D contains the standard boilerplate that Rachesky's firm has acquired a stake because it feels the company is undervalued and they may seek to engage with discussions with management.

Carl Icahn Involved Too

Rachesky is now the company's largest shareholder, just ahead of Carl Icahn.  Icahn has also previously filed a 13D on the company. 

It just so happens that Rachesky previously was a managing director for Carl Icahn's investment vehicles as well.  Icahn was recently named as one of the top 25 highest earning hedge fund managers of 2011.

Icahn originally launched his bet on NAV back in late 2011 and he has been the top shareholder until Rachesky came along.  Icahn also recently boosted his stake to almost 12% of the company, purchasing shares around $24.xx.  However, he originally purchased his stake at prices between $35-40.  As such, the bulk of his investment has an unrealized loss at current prices. 

It seems the two activists are angling for a larger industrial giant to take a stake in the company or perhaps partner with Navistar.  Icahn has also been allowed by the company to put his directors up for election to the board this year.

While Icahn has made some progress, it will be interesting to see if the two activist investors' combined forces can spark more change.

About MHR Fund Management

Rachesky received his B.S. in molecular aspects of cancer from the University of Pennsylvania and an M.D. from Stanford University School of Medicine. Additionally, he also holds an MBA from the Stanford Graduate School of Business. Prior to founding MHR Fund Management, Rachesky previously worked as a senior investment officer and managing director to Carl Icahn. 

About Navistar International

Per Google Finance, Navistar is "a manufacturer of International brand commercial and military trucks, IC Bus (IC) brand buses, MaxxForce brand diesel engines, Workhorse Custom Chassis (WCC) brand chassis for motor homes and step vans, and Monaco RV (Monaco) recreational vehicles (RV), as well as a provider of service parts for all makes of trucks and trailers."

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