Financial speculator Carl Icahn has declared a 7.7 percent stake in Manitowoc and will seek to split the company.
Icahn tried a similar stunt with JLG’s owner Oshkosh in 2011, where he took a 10 percent stake but his attempts to gain a seat on the board and split off JLG in to a separate company failed spectacularly. More recently he took an 8.5 percent stake in Hertz and managed to get three of his appointees on the Hertz board and have a controlling influence on the selection of a new chief executive. All in exchange for not launching a proxy fight.
Icahn has said that he may seek representation on Manitowoc's board and that he wants to see the food and crane divisions split. So far he has not held discussions with the company.
Here we go again, as Icahn spots an opportunity to make a quick buck regardless of whether it makes sense for the business or for longer term, more serious investors. The company recently announced that the Crane business will post a single digit decline in revenues during 2014, which hit the share price and has encouraged speculators who sense a short term opportunity.
Whether it makes sense for a public company to own both crane and food equipment businesses is a good question. It is not down to any particular strategy, having come about for historic reasons, with Manitowoc shipbuilding building large cranes and then diversifying into ice making machines many years ago. The fact is that the two operations are self-contained and do provide long term shareholders with some diversity to smooth the cyclical nature of the crane business.
Manitowoc does not carry a significant corporate overhead, while each business probably benefits from lower borrowing and treasury costs by being part of a group. Creating two smaller quoted companies will increase costs, while shareholders will have to pick up the substantial legal and advisor costs involved, both transaction related and ongoing. A trade buyer could be found for one or the other, but this can be done at any time and does not require a formal split.
The crane market has a good long term future, Manitowoc has some interesting new products that will begin shipping in 2015 and really does not need the uncertainty and disruption that speculators like Icahn can cause.