16.10.2006

Oshkosh to buy JLG

Oshkosh Truck Corporation has signed a definitive agreement to acquire JLG Industries, in a cash deal worth $3.2 billion, including closing costs.

Oshkosh is paying JLG shareholders $28 per share an eight dollar premium on its close last week, and assuming some of JLG’S outstanding debt.

The acquisition has been approved by the board of directors of each company and is subject to customary closing conditions. Completion is expected within 90 days.

Once the deal has been completed, JLG will become the largest of four business segments of Oshkosh, the others being Airport and Municipal, Defense and Concrete placement. By 2008 Oshkosh anticipates that JLG will represent around 40 percent of its revenues and operating income.

Oshkosh has production facilities in the USA, Canada, Holland, Mexico and Sweden.

Bill Lasky president and chief executive officer of JLG said
"This transaction is a good fit for JLG, Oshkosh has a similar philosophy of offering premier products, creating strong market positions and delivering after-sales service and support. For the JLG team, this combination offers additional growth opportunities".

"For our customers, JLG will become an even stronger partner in their future success. We look forward to working with the Oshkosh management team to ensure a rapid and seamless transition."
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Robert Bohn

Robert G. Bohn, Oshkosh's chairman, president and chief executive officer said .
"We are excited about the addition of this market-leading, global company and expect a smooth integration into the Oshkosh family. At the same time, we expect to realize substantial purchasing and logistical synergies, while benefiting from JLG's already outstanding manufacturing operations."

"We have consistently executed strategies to grow this company, creating significant shareholder value during the last decade. The acquisition of JLG is the latest broad-based initiative in the continuing transformation of Oshkosh Truck Corporation. It is aligned with our historic acquisition strategy as we expand into complementary markets and it will be instrumental in building our global focus and scale that are increasingly needed to continue to be successful", Bohn added.

The transaction will create a company with 13,000 employees and $6 billion in annual revenues.

Vertikal Comment

This announcement came as a complete surprise and is an interesting move for Oshkosh. The company is a well established acquisitive producer of specialist equipment.

At one time Oshkosh produced standard trucks for the commercial market, but pulled back into speciality vehicles, including fire trucks, concrete mixers and military vehicles,where it has prospered.

One assumes that with JLG it will allow the management to get on and run the business along the very successful lines of the past few years. A key aspect of this could be what Bill Lasky chooses to do.

Lasky was reportedly preparing to hand over some of his operational duties to Craig Paylor. How this will pan out it is hard to say, the role that Lasky plays in the next 12 months could have a significant impact on the success of this aquisition.

In terms of benefits it is hard to imagine that a $6billion company will be able to negotiate significantly better prices on too many purchased items than a $3billion company. Particularly when they share very few components, markets or customers.

Oshkosh has become very acquisitive in recent years and this deal is the largest of a chain of deals, which included Jerr-Dann of Greencastle in 2004, another spin off from Grove and earlier this year IMT, the loader crane and service vehicle body producer.

On the announcement JLG shares rose close to the bid price, while Oshkosh shares, which had started to recover from an mid-year low, dropped over five dollars from their Friday close.

Clearly the first reaction of the market is that this is a better deal for JLG shareholders than for those holding Oshkosh stock.

Watch this space...