Navistar International Corp. (NAV) has adopted a stockholder rights plan in order to prevent a hostile takeover by a few powerful investors. The company disclosed the plan after hedge fund manager Mark Rachesky revealed that he controls a 13.6% stake in the company, which is even higher than the 11.9% stake owned by billionaire activist investor Carl Icahn.
Navistar stated that it will distribute one preferred stock purchase right as a dividend on each share held as of June 29, 2012. The rights are exercisable if a shareholder acquires at least 15% of common stock or starts a tender offer that would lead to a stake larger than 15%. With this, the company would be able to prevent powerful investors from gaining control of the company without offering a fair price to all of its stockholders.
Navistar reported a loss of $137 million or $1.99 per share (excluding special items) in the second quarter of 2012 ended on April 30, 2012, in sharp contrast to a profit of $102 million or $1.30 per share recorded in the corresponding quarter of last year and the Zacks Consensus Estimate of a profit of $0.67 per share.
Revenues went down 2.9% to $3.3 billion from $3.4 billion in the prior-year quarter. It was lower than the Zacks Consensus Estimate of $3.6 billion. The decline in revenues was attributable to decrease in sales in engine and part segments, which were partially offset by higher sales in the truck segment.
Recently, Navistar lowered its annual profit forecast to break-even to $2 per share as it failed to win U.S. Environmental Protection Agency certification for its 13-liter engine. Currently, it retains a Zacks #5 Rank stock on it shares, which translates into a short-term (1 to 3 months) rating of Strong Sell. Its main competitors include PACCAR Inc. (PCAR).
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