12.10.2012

Icahn bids for Oshkosh

Carl Icahn is taking another run at JLG owner Oshkosh and says that he will make a tender offer for the 90 percent of the company’s shares that he does not already own at a price of $32.5 a share, valuing the business at around $3.4 billion when debt is taken into consideration.

The offer price represents a 21 percent premium on the share price, but is lower than the midterm expectations of many analysts for the stock and almost half its peak levels.

Icahn has been lobbying Oshkosh to spin off JLG and previously wanted the company to merge its truck business with Navistar in which he owns a 10 percent stake.

He said the tender offer would last for 45 days once launched and would be conditional on shareholders electing his nominees as company directors, in order to “remove impediments to the offer under Wisconsin law”. Icahn says that the deal would not be subject to finance as he has the cash to buy the shares on hand. Oshkosh said that it would respond to the unsolicited offer in 10 days.

At least one major shareholder has already said that the price is too low and that it will side with the management.

Vertikal Comment

Icahn has been pestering Oshkosh since he acquired his 9.5 percent stake in mid-2011. The man has not managed an operational business himself, he simply looks for businesses where he believes he can make a short term gain before moving on to another target. He and his practices have been referred to by many different names including a ‘shakedown artist’ and worse and he has been sued in the past by shareholders for underhand tactics that boosts his profit while damaging theirs.

Oshkosh acquired JLG in 2006 in order to provide further diversification to its military and specialist vehicle divisions. That strategy has worked well, when JLG was in the doldrums in 2009 and 2010 the defence business was on a high – now that defence is down JLG is on a strong upward trend, with plenty of further upward potential.

Icahn’s advice to break up of the business would simply generate tens of millions of dollars in advisor fees and a short term capital profit for some shareholders. Unless he ups his offer significantly investors are likely to do far better staying with the Oshkosh management and its strategy.

If Icahn does succeed JLG’s future will depend very much on who buys it, or if it is floated as a public company, how much debt it is lumbered with.