06.01.2012

Icahn stirs up Oshkosh

Corporate raider Carl Icahn has written to Oshkosh shareholders criticising the management and suggesting it explores alternatives for JLG.

The letter is mostly aimed at encouraging Oshkosh shareholders to vote for six nominees that he has put forward as non-executive directors. If his proposal was approved, it would give him control of almost half the board, yet he owns just over nine percent of the stock.

The directors he is trying to get onto the Oshkosh board at the company’s Annual General Meeting on January 27th are mostly his employees or employed by a company with which he is affiliated. They are: A.B. Krongard, 75, an ex-executive director of the CIA. His name has been associated with Blackwater Security and he is a director of United Armour. Vincent J. Intrieri managing director of Icahn Enterprises; Samuel Merksamer a senior analyst at Icahn Enterprises; Jose Maria Allapont chief executive of Federal Mogul; Daniel Ninivaggi president of Icahn Enterprises and Marc Gustafson of Gustafson Consulting and until 2007 president of Federal Signal’s Fire and rescue division of which only Bronto remains.

The move mirrors Icahn's long-standing pattern of using closely aligned directors to pressure management and increase short term stock prices. In his letter he says: “I believe that my six director nominees have the necessary skills, experience and objectivity to help fix the problems at Oshkosh. I think change is necessary and crucial for the future success of Oshkosh.”
Click here to see Icahn buys into Oshkosh
Later he goes on to suggest that the management should: “Immediately explore alternatives for JLG to reallocate capital to debt reduction, returning capital to shareholders and providing opportunities to pursue a more active acquisition strategy surrounding core businesses. Capitalise on a weak economy by consolidating existing niche businesses and entering new synergistic product lines rather than waiting to see how the economy progresses. Aggressively seek small acquisitions and joint venture opportunities in core product areas to develop a comprehensive international growth strategy.”
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Carl Icahn

He also adds “Position the company to participate in coming defence industry consolidation as both a buyer and/or a seller.” This may be his core aim, given that he owns a similar stake in Navistar which also builds military vehicles and trucks.

Oshkosh management, responding to Icahn’s move, questioned the qualifications of his director nominees, pointing out that he does not fully understand Oshkosh's business lines and in a letter to shareholders said: "Mr. Icahn has not demonstrated that he has a plan or a team that can lead your company and deliver value to all Oshkosh shareholders, he is seeking to control nearly half of the Oshkosh board, yet has provided no substantive ideas or analyses to enhance value for all shareholders."

Nowhere in the letter does he say what he is referring to when he says ‘Core businesses’ given his other investments one has to assume that it is the truck business.


Update:

Oshkosh has said this week that Icahn's strategy involves selling JLG, in order to focus on the truck business and merging with Navistar, in which he also owns 10 percent, with the aim for him to gain a 20 percent holding in the combined business.

Vertikal Comment

Icahn, 75, now prefers to be known as an ‘activist investor’ often posing as someone fighting for the rights of small shareholders in the face of incompetent management.

In reality it is all about making money for Icahn, often with a short term view. He then cashes out leaving the less adroit to suffer from the longer term fallout from the short term policies that he agitated for.

He has spent his entire career on Wall Street and never managed, what some would call a ‘real business’. Since 1978 he started buying significant stakes in what he considered to be vulnerable or badly managed companies and then agitating for change, fighting endless proxy battles along the way.

In some cases he has been right in attacking fat cat incompetent management teams and useless boards of directors. However he has also taken runs at well managed companies that simply did not subscribe to Wall Street’s often fickle and short term focus on daily changes in the share price.

He has been called a ‘shakedown artist’ whose ‘word is worthless’ and probably much worse along the way.

In this case it looks as though having purchased less than 10 percent of the business he is trying to exert a totally disproportionate influence on a business which has come through an exceptionally tough recession in good shape and is set to benefit from its leading position in the access equipment and telehandler market which is set to grow rapidly just as the defence business slows.

Oshkosh may well have paid over the odds for JLG and the timing might have been better, but hindsight is a wonderful thing and over the long term it is likely to prove to have been a sound investment and one that the company will be glad it made. Ichan is one of a dying breed of hedge fund types that live off of bets made on the market, which they then try to influence through their activism.

If Icahn is serious about helping Oshkosh improve its business in these volatile times he should put forward one or two good candidates as directors rather than a list of cronies, most of whom have no relevant qualifications to sit on the Oshkosh board.

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A JLG on Wall Street