Carl Icahn Demands That Oshkosh Spin Off JLG, We Agree

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Carl Icahn is not a patient man, but he also doesn’t easily give up.  Throughout his storied career, he has profited

Image of a Oshkosh Truck's plant in Oshkosh, W...

Image of a Oshkosh Truck’s plant in Oshkosh, Wisconsin, United States (Photo credit: Wikipedia)

from forcing companies to make tough decisions to unlock value.  Icahn, who owns 9.64% of Oshkosh Corporation(OSK), lost a bruising proxy battle for six seats in January. At the time he had urged the company to reverse its 2006 acquisition of JLG by selling the division.

The purchase has been a disaster for Oshkosh. In 2006, the company spent $3.2 Billion acquiring JLG. Today the combined company has a market cap of just $2.19 Billion. In the intervening years, the bottom fell out of the construction industry, decimating JLG’s business.  Lately, the division has been performing better, and Icahn believes its value is not being recognized by the market, and will not be soon. Thus, Icahn is telling the company to immediately pursue a spinoff of JLG.

Icahn’s representatives met with management today, and subsequently filed the following statement in an amended 13D:

 On August 9, 2012, representatives of the Reporting Persons had discussions with management of the Issuer.  During those discussions, the Reporting Persons expressed their belief that the value of the JLG segment of the Issuer exceeded the total enterprise value of the Issuer and that given the prospects and profitability of the Issuer’s other segments, the value of JLG would not be recognized by shareholders in the foreseeable future.  The Reporting Persons believe that JLG performance has improved enough for it to operate as a stand-alone business, and that the Issuer should immediately pursue a tax-free spinoff of the JLG business to shareholders.  The Reporting Persons may continue to have discussions with representatives of the Issuer from time to time on these and other matters.

 In the past, Icahn has also said that the company should consider merging its truck business with competitor Navistar(NAV) in which he also owns a significant stake.  A spinoff of JLG may increase the likelihood of this occurring. The stock has reacted tepidly, up less than 2% in afternoon trading.  We agree with Icahn that the market is not fully valuing Oshkosh, and that there is room for substantial upside by unwinding the ill-fated 2006 merger.
Disclosure: The author holds no position in any stock mentioned
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