Struggling car rental company Hertz Global Holdings has agreed to give three board seats to activist investor Carl Icahn in exchange for avoiding a proxy war, marking a major victory for the billionaire in his campaign to shake up the company.
Last month, Icahn disclosed an 8.5% stake in Hertz, making him the company’s top shareholder. At the time, Icahn complained that its shares were undervalued that he had a “lack of confidence in management.”
Earlier this week, Hertz CEO Mark Frissora stepped down for “personal reasons,” following investor criticism and accounting errors in three years of financial statements.
Hertz (HTZ) said on Thursday that Icahn’s allies, Vincent Intrieri, Samuel Merksamer and Daniel Ninivaggi, would join its board as independent directors, replacing three retiring directors. Two of those new directors will be on the five-person search committee to find a permanent replacement for Frissora. (Brian MacDonald, head of Hertz’s equipment rental business, is acting as CEO on an interim basis.)
“I would like to thank the Hertz board for acting so expeditiously in agreeing to appoint our three very capable nominees to the board,” Mr. Icahn said in a statement. “I believe Hertz is a great company and a great brand and that the right new C.E.O. Will return it to its former glory.”
Icahn won another important concession by Hertz raising its “poison pill” threshold — a tool meant to prevent a hostile takeover if a shareholder amasses too being a stake– to 20% of shares from 10%.
Linda Fayne Levinson, independent non-executive chair, said the deal with Icahn “eliminates distraction” at a time the car rental company’s is trying to fix its business. Hertz warned last month that results for 2014 would be “well below the low-end” of its previously stated guidance, citing operational challenges in the rental car and equipment segments as well as the associated costs related to the accounting review. The company also withdrew its financial forecast.