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Carl Icahn Strikes Again

In the Nov. 14 Private Briefing report "Do You Own This Carl Icahn Stock?" we told you that the legendary corporate raider (he now prefers "activist investor") was looking to revive a five-year-old plan to merge to railcar-manufacturing companies.

And that's precisely what happened.

On Tuesday, American Railcar Industries Inc. (Nasdaq: ARII) – a Private Briefing recommendation that's controlled by Icahn – offered to buy rival railcar maker The Greenbrier Cos. (NYSE: GBX) for roughly $543 million.

We originally recommended American Railcar on Nov. 16, 2011. The stock is up more than 44% since then. But even investors who acted after we reported on Icahn's plan back on Nov. 14 of this year have done well. The stock closed at $29.51 that day and is up 22% since we warned of the looming deal.

On Tuesday, American Railcar offered to buy Greenbrier for $20 a share. That's 5.4% higher than where Greenbrier shares closed on Monday. But Greenbrier was trading at $20.76 a share yesterday, an indication investors think a higher offer is coming.

In a note to clients, Bascome Majors, an analyst at Susquehanna Financial Group, wrote that: "Icahn's [offer] raises pressure on the board to consider a sale, though it doesn't explicitly say he'll go hostile near-term."

Indeed, American Railcar could pay as much as $23 per share through a cash-and-stock deal – and still add 15% to the company's earnings, Majors said.

Icahn Enterprises LP,which controls 55.6% percent of American Railcar according to its most recent filing, said the offer followed actual discussions with Greenbrier.

The Lake Oswego, Oregon-based Greenbrier grew rapidly in 2011 as the boom in hydraulic "fracking" boosted the need for railcars capable of transporting oil and sand. That forced Greenbrier to accelerate production and enabled it to raise prices.

But demand has been slowing: In November, for instance, the company said the railcar orders it received in the most-recently concluded quarter had fallen to almost half of what it got the year before.

Mergers such as this one allow companies to slash duplicative operations and costs, bringing the savings right to the bottom line.

Icahn tried to merge the companies back in 2008, but dropped his bid over what he termed as "unresolved issues."

At the time, Greenbrier shares were trading at roughly $30. Thomson Reuters StarMine research says the target company's "intrinsic value" is $28.56.

American Railcar is the fifth Private Briefing recommendation to be involved in a takeover deal since we launched this service 16 months ago. The other recommendations, and their peak gains, consisted of Pentair Inc. (NYSE: PNR) (53%), CNH Global Inc. (NYSE ADR: CNH) (67%), Nexen Inc. (NYSE: NXY) (60%) and CNOOC Ltd. (NYSE ADR: CEO) (35%).

CNOOC, it should be noted, was the suitor of Nexen, but has posted that peak gain since Chief Investment Strategist Keith Fitz-Gerald recommended it.

Permanent Wealth Investor Editor Martin Hutchinson recommended Nexen to Private Briefing readers on two occasions – at $19.50 in early September 2011 and at $16.85 back in July, just two weeks before CNOOC launched its buyout bid. That means the stock has gained 38% or 60%, depending on which recommendation subscribers acted upon.

[Editor's Note: If you invested in any of these takeover winners, I'd like to hear your story. Write to us at PrivateBriefing@MoneyMorning.com. And remember: We recommend investors maintain a "trailing stop" of 25% on all holdings.]

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