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2nd UPDATE: Former Icahn Aide Takes 13.6% Stake in Navistar

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--Investor Mark Rachesky acquires 13.6% stake in Navistar

--He surpasses Carl Icahn as Navistar's biggest shareholder

--Rachesky opposed Icahn's bid for movie studio Lions Gate

 

(Adds comments from analysts, other information, in the fifth, 16th and 17th paragraphs.)

 
   By Bob Tita 
 

Activist investor Mark Rachesky, a former protege of billionaire investor Carl Icahn, has acquired a 13.6% stake in truck maker Navistar International Corp. (NAV), providing fresh evidence that large investors intend to exert influence over the direction of the struggling company.

Mr. Rachesky's MHR Fund Management LLC reported Friday that it obtained 9.3 million shares of Navistar in recent weeks, catapulting him past Mr. Icahn as the company's largest shareholder. The filing said MHR used both direct stock purchases and options to acquire Navistar shares. Most of the stock was purchased at prices averaging about $26 to $29 per share, while the options have an exercise price of $25.53 a share.

In a filing with the Securities and Exchange Commission, Mr. Rachesky said he considers Navistar's shares to be undervalued. New York-based MHR specializes in acquiring stakes in troubled mid-cap-sized companies. The firm manages about $5 billion in assets.

Observers described him as maintaining a low-profile and avoiding publicity, unlike Mr. Icahn, whose numerous proxy fights and bold proposals for shaping up ailing companies have made him a lightning rod for controversy.

"He's opportunistic, but patient," said David Joyce, an analyst for broker Miller Tabak & Co., about Mr. Rachesky. "He takes big, concentrated positions in companies and take a deep value approach to investing."

Mr. Rachesky's filing said MHR may engage in talks with Navistar executives about the company's operations, but offered no hints about his strategy for the investment. Nevertheless, the filing helped Navistar's shares close up 7.6% on Friday at $29.95 a share.

Mr. Rachesky was Mr. Icahn's primary adversary in his prolonged campaign to acquire control of television and movie studio Lions Gate Entertainment Corp (LGF). His Navistar stake could place the two men on a similar collision course involving the Lisle, Ill.,-based manufacturer of International-brand trucks. Mr. Icahn didn't return calls for comment. A spokesman for Mr. Rachesky said there would be no comments beyond what the firm outlined in its filing.

After a bruising fight over Lions Gate, it is unclear whether Mr. Icahn and Mr. Rachesky's relationship was permanently damaged, analysts said.

Last week, Mr. Icahn boosted his stake in Navistar to 12% amid increasing doubts about the viability of the company's truck-engine strategy following two straight quarters of unexpected losses caused by rising warranty claims on Navistar's new 13-liter engine.

Mutual-fund manager Mario Gabelli, who has been one of Navistar's largest shareholders for a long time, revealed last week that he bought more than 500,000 shares of Navistar, elevating his stake in the company to 4.2 million shares, or 6.2%. Mr. Gabelli declined to comment on the increase.

Mr. Icahn established a large investment in the company late last year as part of what appeared to be a plan to merge Navistar with specialty truck maker Oshkosh Corp. (OSK). Mr. Icahn waged an unsuccessful campaign early this year to replace members of the Oshkosh board. Navistar's recent struggles would appear to provide Mr. Icahn with the ammunition to launch a proxy fight this autumn for control of Navistar's board or a campaign to press the sale of the company.

The potential for an Icahn-initiated proxy fight is likely attracting investors, who are interested in supporting or opposing Icahn. Navistar's stock price has fallen 29% in the past three months.

Last week, Navistar attempted to defuse increasing shareholder frustration with the company by realigning its executive ranks. The changes placed former General Motors Co. (GM) executive Troy Clarke in a position to succeed Chairman and Chief Executive Daniel Ustian, but Mr. Ustian has given no indication that he intends to leave the company.

Mr. Rachesky, who holds a medical degree, co-founded MHR after working as Mr. Icahn's chief investment officer during the 1990s. He was one of Lions Gate's largest shareholders when appointed to the company's board in 2009--a move largely aimed at countering Mr. Icahn's efforts to gain control of the company. Mr. Rachesky, who was an ally of the studio's management, expanded his influence over the company through a controversial 2010 purchase of Lions Gate's debt in exchange for greater equity in the company.

The transaction raised his stake in the company and diluted Mr. Icahn's holdings. Mr. Rachesky used his enlarged share count to oppose an Icahn-backed slate of board candidates waging a proxy fight. Mr. Icahn's candidates were defeated, and he later sold a large portion of his Lions Gate stake to Mr. Rachesky.

Analysts credited Mr. Rachesky with contributing a measure of stability to Lions Gate after Icahn shed his investment in the company. Lions Gate stock price is up nearly 70% since the start of the year at $14.14 a share.

"So far, he's been good for Lions Gate," said Alan Gould, an entertainment-industry analyst for investment-bank advisory firm Evercore Partners Inc. "It would have been tougher for Lions Gate to stay independent if they didn't have him as a shareholder."

 

Write to Bob Tita at robert.tita@dowjones.com.

 

(END) Dow Jones Newswires

June 15, 2012 18:01 ET (22:01 GMT)

Copyright (c) 2012 Dow Jones & Company, Inc.

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