Icahn Acquires Stake in Greenbrier to Push Merger with American Railcar Industries (ARII)

Billionaire investor, Carl Icahn, announced Tuesday in an SEC filing that he now owns a 9.99% stake in Greenbrier (NASDAQ: GBX). Icahn acquired a 9.5% stake in Greenbrier in 2008 and pushed for a merger with American Railcar (NASDAQ: ARII), in which he has a majority investment of 55.6%. However, that deal fell through because of unresolved issues.

The current investment in Greenbrier has brought back the possibility of a merger between Greenbrier and American Railcar since Icahn has contacted Greenbrier CEO, Bill Furman, to schedule discussions regarding possible lucrative and plausible opportunities.

The two companies have plenty of synergy since both Greenbrier and American Railcar have a joint venture in Ohio Castings. Additionally, Greenbrier has bought railcars and subcontracted manufacturing work to American Railcar. American Railcar and Greenbrier compete directly, so a merger would reduce competition for both and diversify American Railcar’s business in the refurbishment and parts units.

About American Railcar

American Railcar Industries is headquartered in Saint Charles, Missouri. American Railcar designs and manufactures new railcars and railcar parts. American Railcar also runs a network of repair centers. American Railcar also provides rail fleet engineering and management services to railroads, equipment leasing companies and shippers.

About Greenbrier

Oregon-based Greenbrier is a major supplier of transportation services and equipment to rail companies. Greenbrier makes railroad freight cars and marine barges. Greenbrier also repairs, refurbishes and provides railcar parts in North America. Greenbrier’s refurbishment and parts unit accounts for 30% of 2012 revenues, while the new railcars unit accounted for 69% of the revenue, with barges being negligible. Greenbrier had a weaker quarter with profit falling to $7.4 million from $12.6 million a year earlier. However, Greenbrier has a strong order book, with its barges unit having a backlog of $25 million.

The Deal

Furman has disclosed that Icahn has asked for a meeting to discuss possible strategic opportunities. However, no firm date has yet been fixed for the meeting. Furman has described Icahn as a respected investor, while Greenbrier CFO, Mark Rittenbaum, said he has a healthy respect for Icahn. Rittenbaum also said that Icahn’s interest in Greenbrier was more strategic than an activist campaign. This could be because Greenbrier has been dealing with Icahn through American Railcar for the past ten years. While Icahn is known for hostile takeover bids and criticism of management of companies in which he takes an interest, the relationship with Greenbrier is expected to be smoother because of the strategic interest and the value of a merger between American Railcar and Greenbrier.

Market Movement

Shares of American Railcar Industries went up by 17.7% on Tuesday to close at $31.16 with 419,920 shares changing hands. Other companies that saw an increase in share prices on Tuesday include Immersion Corporation (NASDAQ: IMMR), which saw an increase of 12.9% to $5.76 with 416,814 shares traded.

Clean Energy Fuels (NASDAQ: CLNE) shares went up by 10.9% to $12.26 with 4.6 million shares traded. Coldwater Creek (NASDAQ: CWTR) shares went up by 7.2% to close Tuesday’s session at $4.93 on a volume of 464,288 shares.

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Published by Benjamin Roussey

Benjamin Roussey is from Sacramento, California. He has two master’s degrees and served four years in the U.S. Navy. His bachelor’s degree is from CSUS (1999) where he was on a baseball pitching scholarship. His second master’s degree is an MBA in Global Management from the University of Phoenix (2006). He has worked for small businesses, public agencies, and large corporations. He has lived in Korea and Saudi Arabia where he was an ESL instructor. Benjamin spends his time in between Northern California and Cabo San Lucas, Mexico, committing himself to his craft of freelance and website writing. http://www.facebook.com/ben.rouss