Car rental service Hertz (HTZ) agreed to put three of activist investor Carl Icahn’s hand-chosen appointees on the company’s board. The move comes as a surprise to those who expected a drawn-out and painful fight over board seats, a battle that would likely have turned ugly quickly. HTZ stock was up as much as 3% in intraday trading on the news.
Under the terms of the Hertz-Icahn agreement, three of Icahn’s posse members — Vincent J. Intrieri, Samuel Merksamer, and Daniel A. Ninivaggi — will replace three current HTZ board members, who will retire to make room for the newcomers. While Icahn’s associates will occupy just three of the 11 HTZ board seats, two of the three will reportedly get spots on the five-person committee that will be responsible for choosing the next HTZ CEO.
HTZ CEO Mark Frissora stepped down on Monday as Hertz’s Chairman and CEO for “personal reasons.” Given the newly reached Hertz-Icahn deal, it appears as if one of those personal reasons was that Icahn basically gave him the boot.
Unsurprisingly, Icahn has complained about the ineffective management of HTZ in the past. Such complaints aren’t atypical of a Carl Icahn investment. The pioneering activist investor seeks out companies that he thinks are poorly managed, misunderstood, poorly structured, and so on. He then builds a meaningful position in the stock, and uses his voting power to lobby the company to make serious changes that will likely produce a quick boost to the stock price. When that’s happened, Icahn will typically sell his stake and repeat the process with another unwitting target. Sometimes he holds positions for the longer-run, but he’s no Warren Buffett in that respect.
In the case of Hertz, HTZ stock is bouncing today because the newly reached agreement avoids the chance that Icahn would instigate a proxy context at the next shareholder meeting, in which he would use his reported 8.5% stake in the car rental company to vote out executives and rally other investors to do the same, in what could amount to a hostile coup if successful.
While HTZ made a number of concessions to Icahn, including the amendment of a rule that essentially prevents any one investor from controlling more than 10% of HTZ shares, reaching an agreement with Icahn ensures that HTZ stock will enjoy a smoother ride in the short-term. The looming issue of a proxy battle no longer threatens to distract management from actually managing the company.
As of this writing, John Divine was long AAPL stock.