Market Overview

American Railcar and Greenbrier Fall as Deal Seems Unlikely

American Railcar and Greenbrier Fall as Deal Seems Unlikely

Railcar manufacturers Greenbrier (NYSE: GBX) and American Railcar Industries (NASDAQ: ARII) both traded lower on Thursday as investors speculate that a proposed merger of the two companies is unlikely. Corporate raider Carl Icahn owns a majority of St. Charles, Missouri-based American Railcar's stock and as Chairman of the Board, he is pushing for an acquisition of competitor Greenbrier.

American Railcar has offered $22.00 per share for Greenbrier in what is known as an exploding offer -- it is only good until 2 p.m. EST on Friday. Greenbrier said that a previous Icahn-led bid for the company of $20.00 per share "grossly undervalues" the company.

Greenbrier then expressed interest in acquiring American Railcar, but those overtures were flatly rejected by Icahn and American Railcar who said that the company is not for sale. Subsequently, Icahn sweetened his bid for Greenbrier with the $22.00 per share offer.

“American Railcar's offer represents full value for Greenbrier and will not be increased under any circumstances,” Icahn Enterprises' president and CEO, Daniel Ninivaggi, said in an open letter to Greenbrier's president and CEO, William Furman.

According to the Icahn-led group, after weeks of talks, they were led to believe that Greenbrier would accept a price between $20.00 and $22.00.

“We would never have made the offer had we not believed that we had (Furman's) support and the support of a substantial number of directors for a transaction in the price range we discussed,” he wrote in the letter.

Ninivaggi added that the outright rejection “is completely inconsistent with what we were led to believe by your investment banker."

Investors are skeptical that a deal is forthcoming, sending shares of both companies lower on Thursday. Greenbrier shares have plunged almost 12 percent to $18.17 while American Railcar was trading down more than 8 percent to $33.11.

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