Navistar Amends Stockholder Plan

By Michael G. Malloy, Staff Reporter

This story appears in the June 30 print edition of Transport Topics.

Navistar International Corp. said last week that it amended its stockholder rights plan in order to discourage any person or group from obtaining 5% ownership, a move intended to protect the long-term value of its tax assets.

Separately, the truck maker said its International ProStar tractors, coupled with automated and automatic transmission configurations, can boost fuel economy by up to 5%.

Navistar said its amended plan is essentially a tax asset-protection plan.

Its existing shareholder rights plan, commonly referred to as a “poison pill,” was set to expire July 1. The amended plan is scheduled to expire Sept. 1, Navistar said.

Navistar “has regularly reviewed the plan to determine its alignment with the best interests of the company,” said James Keyes, Navistar’s non-executive chairman, adding that it’s “appropriate to implement this tax asset-protection plan.”

The poison pill, originally adopted in June 2012, exempted a person or groups from owning 15% or more of the company’s stock. Last July, that limit was raised to 19.99%. That reduces the likelihood of an unintended ownership change.

Two main outside investors now have significant stakes in the truck and engine maker: Carl Icahn holds 18%, and Mark Rachesky’s MHR Fund Management holds 17%, according to Bloomberg data. Each holds two seats on the company’s 10-member board.

“The tax asset-protection plan is meant to preserve the value of Navistar’s deferred tax assets, not to serve as a takeover defense,” spokesman Steve Schrier told Transport Topics.

As of Oct. 31, the end of its fiscal year, Navistar had a federal net operating loss, or “carry forward,” of about $1.8 billion, which it can use as a write-off against future profits, essentially negating tax liability.

Under IRS guidelines, the use of the company’s net operating loss and other carry forwards would be limited in the event of an ownership change — defined as a cumulative change of more than 50% during any three-year period by shareholders of 5% or more of a company’s stock.

Existing stockholders who hold 4.99% or more of the company’s shares are exempt from the new plan’s provisions, unless they make additional purchases, Navistar said.

Navistar said although the plan will reduce the risk of an ownership change, “there is no guarantee, however, that the plan will prevent the company from experiencing an ownership change, and the company may pursue additional means of protecting this substantial asset.”

On June 24, a day after Navistar’s announcement about the shareholder rights plan, it disclosed that its portfolio of fully automatic and automated manual transmissions for its ProStar tractors — which include Eaton Cummins Smart Advantage, Eaton UltraShift Plus and Allison TC10 transmissions — can boost the trucks’ fuel economy by up to 5%.

“The increased availability of automated transmissions helps us address the driver shortage issue by reducing the variance between experienced and inexperienced drivers,” said Bill Kozek, Navistar’s president of North America Truck and Parts.

“Every percent of fuel economy improvement makes a difference,” Kozek said.

As part of the engine and transmission combination, the Eaton Fuller Advantage Series Automated transmission will be offered in one rating combining Navistar’s 13-liter engine rated at 450 horsepower and between 1,550 and 1,750 pound-feet of torque for line- and regional-haul applications.

Navistar said additional benefits of its powertrain configurations include optimized engine and transmission communications and intelligent shifting and down-speeding, which allows the engine to operate at lower rpm and to use less fuel without sacrificing performance.