Facing falling stock prices and activist investors, Navistar took a "poison pill," selling off large amounts of its stock at discount to activist investor Mark Rachesky.
In the investing world, a poison pill is to sell off large amounts of stock at a discounted price to make its stock less attractive, and thus, to thwart a hostile takeover by activist investors.
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The Wall Street Journal suggested Navistar's move to sell large amounts of its stock to Rachesky is aimed to activist investor Carl Icahn at bay. Before the move, Icahn had raised his stake in Navistar to 12 percent, previously making him the company's largest shareholder. However, following the sell-off, Rachesky now is the largest shareholder with 13.6 percent of Navistar's holdings.
"The plan is designed to deter coercive takeover tactics, including the accumulation of shares in the open market or through private transactions, and to prevent an acquirer from gaining control of the company without offering a fair and adequate price to all of the company's stockholders," Navistar said in a statement.
Complicating the issue is the fact Rachesky is a former protege of Icahn, and that last year Navistar made an agreement with Icahn, stating the company would not use a poison pill to block Icahn from building his stake.
Navistar is currently in troubled waters, following a lawsuit in which the U.S. Court of Appeals ruled that Navistar could not pay fines to exempt itself from following EPA emissions guidelines. The fines and the redesign for engines that adhere to EPA emissions guidelines may cost the company $50 million.