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Carl Icahn’s American Railcar sweetens offer for Greenbrier

Activist investor Carl Icahn controls American Railcar Industries Inc. and owns 10 per cent of Greenbrier Cos. Inc., both rail car makers.

Chip East/Reuters

American Railcar Industries Inc., controlled by activist investor Carl Icahn, said it was willing to raise its offer for rival rail car maker Greenbrier Cos. Inc. by 10 per cent to about $597-million (U.S.).

American Railcar said it could raise its offer to $22 per share in cash, but the price would not be increased any further.

Greenbrier on Tuesday rejected a $543-million, or $20 per share, bid from American Railcar, saying the offer was not good enough and expressed interest in buying American Railcar instead.

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Greenbrier said it was willing to continue discussions with Mr. Icahn, and that it believes combining the two companies would offer substantial synergies and be beneficial to shareholders of both firms.

Greenbrier said in a statement that in previous conversations, Mr. Icahn talked about acquiring the company at a price of between $20 and $22 per share in cash.

American Railcar's offer revived a nearly five-year old plan to combine the companies.

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

Greenbrier did not say what it would consider a fair price for the company.

The company's intrinsic value is $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.

While rejecting the offer, Greenbrier also said it has repeatedly told Mr. Icahn that it would be interested in buying American Railcar for a "modest premium." American Railcar has a market capitalization of $733.7-million, according to Thomson Reuters data.

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Icahn Enterprises LP controls around 55.6 per cent of American Railcar, according to its most recent filing.

Greenbrier said it is willing "to consider any combination of Greenbrier and American Railcar."

Greenbrier grew rapidly in 2011 when strong demand in the energy sector increased deliveries nearly fourfold, but energy demand has since moderated and its growth has slowed.

Greenbrier reported a quarterly profit in November that was less than half of what analysts expected and forecast a weak 2013.

During Mr. Icahn's failed bid to merge the two companies in 2008, Greenbrier's shares were trading at the $30-range. They slid as much as 30 per cent after it was withdrawn.

Mr. Icahn reported a 9.99-per-cent stake in Greenbrier last month, making him its largest shareholder, and Greenbrier shares have risen 36 per cent since then.

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Greenbrier and American Railcar make, repair and refurbish railroad freight cars.

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