Icahn's American Railcar offers to buy Greenbrier for $543 million
American Railcar Industries Inc , controlled by activist investor Carl Icahn, offered to buy rival railcar maker Greenbrier Cos Inc for about $543 million, reviving a nearly five-year old plan to combine the companies.
American Railcar's offer of $20 per share represents a premium of 5.4 percent to Greenbrier's Monday close. The shares, however, rose above the offer price to as much as $20.20 in morning trade on the New York Stock Exchange, indicating that shareholders are expecting a higher offer.
"Icahn's (offer) raises pressure on the board to consider a sale, though it doesn't explicitly say he'll go hostile near-term," Susquehanna Financial Group analyst Bascome Majors wrote in a client note.
American Railcar could pay up to $23 per share through a cash-and-stock deal that could still add 15 percent to the company's earnings, he said, raising his price target on the Greenbrier stock to $21 from $15.
American Railcar's shares also jumped as much as 8 percent to $34.80 on the Nasdaq.
Greenbrier's shares have risen 36 percent since Icahn reported a 9.99 percent stake in the company last month that made him its largest shareholder.
However, the offer price is still at a discount to the $30-range the Greenbrier stock was trading at when Icahn attempted to merge the companies in 2008. He dropped the bid later that year, saying a combination was not possible due to "unresolved issues". (http://r.reuters.com/pud93t)
American Railcar's offer is also below Greenbrier's intrinsic value of $28.56 as measured by Thomson Reuters StarMine.
The StarMine model is a measure of how much a stock should be worth currently when considering expected growth rates over the next 15 years adjusting for analysts' systematic biases.
Greenbrier has been struggling with moderating demand this year from oil companies.
The Lake Oswego, Oregon-based company grew rapidly in 2011 as strong demand for railcars to transport crude oil and sand for hydraulic fracturing enabled it to ramp up production and raise prices.
The company said last month it received orders for 2,900 railcars during the fourth quarter ended August, nearly half of what it got a year earlier.
Greenbrier, which like American Railcar, makes, repairs and refurbishes railroad freight cars, could not immediately be reached for comment outside of regular business hours.
Icahn Enterprises LP , which controls 55.6 percent of American Railcar according to its most recent filing, said on Tuesday that the offer followed talks with Greenbrier. (http://link.reuters.com/ceg74t)
(Reporting by Sagarika Jaisinghani in Bangalore; Editing by Sriraj Kalluvila)