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12/19/2012


Rail News: M&A
American Railcar's proposed acquisition price 'grossly undervalues' the company, Greenbrier says



The Greenbrier Cos. Inc. yesterday disclosed that the company and its advisers have been engaged in discussions with Carl Icahn and his associates regarding an acquisition of Greenbrier by American Railcar Industries Inc. (ARI), or an acquisition of ARI by Greenbrier. ARI is controlled by Icahn, an activist investor.

ARI has proposed to acquire Greenbrier for about $20 per share in cash, a deal estimated at $543 million. But in previous conversations with Greenbrier, Icahn discussed an acquisition price of $20 to $22 per share in cash, Greenbrier officials said in a prepared statement.

"The Greenbrier board of directors believes a price range of $20 to $22 per share is inadequate, grossly undervalues the company and is not in the best interests of Greenbrier stockholders," they said.

Greenbrier's integrated strategy — which enables the rail-car builder to adapt to car demand changes — and low-cost manufacturing footprint are the primary reasons Icahn’s proposal "grossly undervalues the company," Greenbrier officials said.

In addition, Greenbrier has "repeatedly made clear to Mr. Icahn" its interest in acquiring ARI at a modest premium, taking into account the current full valuation of ARI's stock, they said. Greenbrier board members believe a combination of Greenbrier and ARI could be beneficial to both companies and their stockholders, and that there could be substantial synergies achieved by combining.

"The board remains ready and willing to continue discussions with Mr. Icahn and to consider any combination of Greenbrier and American Railcar that would be in the best interest of the company’s stockholders," Greenbrier officials said. "However, the board will not support a transaction that undervalues the company and the potential benefits to American Railcar, or overvalues American Railcar."

Goldman, Sachs & Co. and Bank of America Merrill Lynch are serving as Greenbrier’s financial advisers, while Skadden, Arps, Slate, Meagher & Flom L.L.P. and Tonkon Torp L.L.P. are serving as legal advisers.

Meanwhile, law firm Block & Leviton L.L.P. yesterday announced it launched an investigation into possible breaches of fiduciary duty by Greenbrier's board concerning ARI's proposed acquisition.

The acquisition price would fail to take into account that Greenbrier's common stock has been steadily climbing, gaining 36 percent in the past month alone, Block & Leviton officials said in a prepared statement. Moreover, the price represents only two-thirds of the offer price in a previous attempt to merge Greenbrier and ARI, they said.

"At least one analyst has set a target price of $35 per share for the company, and the mean analyst target price is $20.60. As such, it appears that the potential transaction offers insufficient recognition of Greenbrier's growth potential," Block & Leviton officials said.

The firm's investigation seeks to determine whether Greenbrier's directors breached their fiduciary duties through a failure to maximize shareholder value in the potential acquisition, and the fairness level of the process used to consider and approve the transaction, they said.

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