Navistar Makes Deal with Icahn to Avoid Proxy Fight

Navistar International Corp. has agreed to give activist shareholders Carl Icahn and Mark Rachesky greater influence at the company in exchange for their promise not to conduct a proxy fight at next year's annual meeting.

The Lisle, Ill.-based maker of trucks and diesel engines will grant those investors one more seat on its 10-member board of directors. Icahn and Rachesky won three seats on the board last August by threatening a proxy fight at this year's shareholder meeting.

Navistar also will allow to each of the two investors to boost his equity in the company to as much as 19.9%. Their holdings are currently effectively capped at less than 15%. Billionaire investor Icahn currently owns 14.9% of Navistar. Hedge fund manager Rachesky holds a 14.95% stake.

The moves give Navistar executives an additional year to restructure the ailing company before the pair of investors can try to seize control of the board. The duo is unlikely to push from within for a breakup or quick sale of the company's assets because such actions now might not generate much profit, analysts tell The Wall Street Journal.