Icahn Makes Offer to Acquire Oshkosh in $3 Billion Deal

Icahn Makes Offer to Acquire Oshkosh in $3 Billion Deal
Carl Icahn was the largest investor in Oshkosh Corp. with a 9.5 percent stake as of June 30, according to data compiled by Bloomberg. Photographer: Scott Eells/Bloomberg

Carl Icahn, the billionaire activist investor, offered to buy Oshkosh Corp. for about $3 billion, saying management of the military vehicles supplier has failed to deliver on pledges to improve profitability.

The $32.50-a-share offer is 21 percent more than the Oshkosh, Wisconsin-based company’s Oct. 10 closing price, Icahn said today in a statement. Icahn said he intends to nominate directors for election to Oshkosh’s board at the company’s annual meeting, with his offer conditional on those directors being elected.

Oshkosh, which supplies blast-resistant trucks to the U.S. Army and Marine Corps, posted a 66 percent drop in net income last year as its sales shrank with the end of the war in Iraq and the U.S.’s plans to withdraw troops from Afghanistan. Icahn, Oshkosh’s largest investor with a 9.5 percent stake, has criticized the firm’s executives for the poor performance.

“Management has taken a passive attitude to the future of this company, willing to sit back and watch what happens to the defense, housing and construction industries,” Icahn said in the statement. “Oshkosh needs proactive shareholders to bring a proactive management team together to weather a volatile economy, a shrinking defense industry and a budget constrained municipal environment.”

No Merger

Oshkosh rose 11 percent to close at $29.90 in New York, after gaining as much as 17 percent. The shares have advanced 40 percent this year.

Icahn’s 14.9 percent stake in Navistar International Corp. has fueled speculation of a merger between the two truck makers. Navistar rose as much as 6.7 percent today on news of his offer for Oshkosh. They gained 2.8 percent to close at $22.61 in New York.

Icahn, 76, known for lobbying for change at the companies in which he invests, this week reached an agreement with Navistar to gain seats on the company’s board.

Icahn has said Oshkosh should consider selling the JLG business, which makes construction lift equipment. Oshkosh shareholders on Jan. 27 rejected his attempt to install six candidates onto its 13-member board.

In an interview today on Bloomberg TV, Icahn rejected the idea of combining the defense segments of Oshkosh and Lisle, Illinois-based Navistar.

Unsolicited Offer

“There’s no chance of that,” he said. “We’re not interested in that. The real interest in Oshkosh has to do with the JLG division and that has nothing to do with Navistar so there really is no relationship.”

It’s time for Oshkosh Chief Executive Officer Charles Szews “to say adios,” Icahn said.

Icahn didn’t make a formal offer to the company and only announced his intention to do so, said John Daggett, an Oshkosh spokesman.

“We don’t have anything,” he said in a telephone interview. “It’s not an actual offer in hand yet.”

In a statement issued after Icahn’s announcement, Oshkosh advised shareholders to “take no action at this time” until its board reviewed the unsolicited bid.

The company said it will consult with financial and legal advisers and notify shareholders of its position within 10 business days of receiving an offer. Goldman Sachs Group Inc., based in New York, is serving as financial adviser and Skadden, Arps, Slate, Meagher & Flom LLP and Foley & Lardner LLP are serving as legal advisers, Oshkosh said.

‘Nice Growth’

“I wouldn’t sell to Icahn,” Walter Liptak, an analyst for Chicago-based Barrington Research, said in a telephone interview. “The value is too low.”

Liptak, who has an outperform rating on the stock, said Oshkosh outlined a “really nice growth track” over the next three years at a Sept. 14 presentation for analysts.

Demand for Oshkosh’s military trucks for the Iraq and Afghanistan wars made the company one of the Defense Department’s biggest contractors. Revenue surged almost seven-fold to $9.84 billion in fiscal 2010 from $1.45 billion in fiscal 2001, the year the U.S. began operations in Afghanistan.

That military business has waned with end of the war in Iraq and drawdown in Afghanistan. Oshkosh had $7.58 billion in revenue in fiscal 2011, more than half of which came from its defense segment. The company received $4.9 billion in direct, or prime, Pentagon contracts in the year ended Sept. 30, 2011, ranking No. 11, according to a Bloomberg Government ranking of the 200 largest contractors.

In July, the company’s shares gained the most in almost three years after Oshkosh raised its full-year forecast. Revenue from construction equipment helped boost results in the third quarter, the firm said at the time. Oshkosh’s heavy-duty vehicles include firefighting trucks and aircraft rescue vehicles.

Oshkosh was one of three companies that in August won contracts totaling more than $185 million with the U.S. Army to develop Humvee replacements. It also makes 2.5- and 5-ton capacity cargo trucks for the service.

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