Oshkosh To Icahn: How Does That Poison Pill Taste?

Maybe life isn’t so easy for corporate activists these days. After acquiring a ~9.5% stake in specialty truck maker Oshkosh Corporation (OSK), Carl Icahn has so far been unsuccessful in his push for a spinoff of lift equipment maker JLG. Even after his slate of directors lost at the most recent election, Mr. Icahn has not given up though. Talk about persistence. His latest tactic was to issue shareholders a tender offer at $32.50/share, valuing the company at ~$3b or less than the company paid for JLG itself just a few years ago. In his letter, Mr. Icahn urges shareholders not to buy into management’s 5 year viability plans arguing that ‘mismanagement’ of the company has resulted in “a lost decade of shareholder value.” As part of his offer, Mr. Icahn expects that his slate of board nominees would be elected at the next annual meeting.

The board was obviously not happy with this development and quickly sent out a letter advising shareholders to reject the tender offer as it is “inadequate, undervalues the Company and is not in the best interests of all Oshkosh shareholders.” The letter even gets a bit more personal by attacking Mr. Icahn’s past dealings and ‘self-serving’ motives. The company also reiterated its MOVE strategy which targets achieving the following goals by FY 2015: a 10% CAGR in non-defense revenue, stronger operating margins, geographic expansion and a doubling of EPS to $4-4.50/share. The bottom line is that the company is very committed to keeping JLG in house.

In case that wasn’t enough though, the board also adopted a shareholder rights plan (aka a poison pill) which offers additional shares if any active shareholder obtained a 10+% stake. Not very good corporate governance, but definitely a wrench in Mr. Icahn’s plans.

The stock currently trades at a nice discount to Mr. Icahn’s tender offer signifying little confidence in the maneuver. As a result, a length proxy battle looks likely although he could always raise the number. If Mr. Icahn’s slate were to prevail then the poison pill would be revoked and the board would likely give him permission to raise his stake above 10%. A spin of JLG would then be likely. These situations are certainly more interesting when boards fight back and we will keep you updated as this situation progresses.

Disclosure: Author holds no position in any stock mentioned.