Activist investor Carl Icahn bought 1.9 million shares of Navistar International Corp. (NYSE:NAV), issued in a bid, to ease financial concerns. Icahn used five of its investment funds to acquire the new stake, which ensured that he retained his 14.95% holding in the company, despite the additional shares offered. The shares were acquired at an average price of $18.75 per share, for a total of $29.9 million.
In total, Carl Icahn now holds 11,845,167 shares in Navistar International Corp. (NYSE:NAV) out of 79,257,293 shares of common stock outstanding for the special vehicles manufacturer, as per the form 13D filed with the Securities Exchange Commission late Thursday, October 25.
Icahn acquired 569,319 shares through Icahn Partners LP, while Icahn Partners Master Fund III LP acquired the least, at only 87, 615 shares of common stock, but were all acquired at a premium price of $8.75, as compared to the day’s closing rate of $8.59 per share. Other major buyers of the company’s stock included Gabelli Funds LLC, which now holds 5,648,430 shares or 8.24%.
According to Bob Tita, writing for Dow Jones News wires, the Navistar “board enacted a so-called poison-pill plan in June, when activist investors, such as Mr. Icahn and his former protege, Mark Rachesky, began buying large blocks Navistar’s depressed stock.” The two held 14.9% stakes in the company even before yesterday’s offering additions.
Navistar International Corp. (NYSE:NAV) has a market cap of about $1.28 billion, and its trailing twelve months P/E ratio is more than 95x, with the forward P/E, for the period ending 31st December, 2013 estimated at 1,866x. The company’s enterprise value is estimated at $5.06 billion, or 19.46 times to EBITDA, 0.36 times to revenue, interestingly, the EV is more than four times the market cap, which justifies the company’s dire need for cash. (NB: EEV=Market Cap+Debt-Cash).
The company’s cash reserves indicate a positive cash flow of $627 million, or $9.14 cash per share, but this is against an outstanding debt of $4.41 billion, again compared to a market cap of just $1.23 billion, which begs the question, who really owns Navistar, the creditors, or the shareholders? I believe the newly offered shares should boost its market cap, if the company can maintain its current price of about $18.72 per share, up $0.13, or a 0.70% increase from yesterday’s close.