Battle for board continues at Oshkosh

By Murray Pollok10 January 2012

Carl Icahn, the largest shareholder in Oshkosh Corp, has continued in his bid to get his six nominees elected to the Oshkosh board, with a detailed presentation of what he considers the company's current shortfalls and recommendation for future actions. Oshkosh has responded by reissuing its own presentation to shareholders, including details of its interaction with the Icahn Group.

Mr Icahn said in the latest presentation that JLG was overpriced at the time of its purchase in 2006 and that it does not fit comfortably within a defence/vehicle company. He claimed differing customers and distribution channels meant that "managing recovery at JLG will likely drain limited management resources."

Mr Icahn's plan would be to sell JLG and use the money for debt reduction and to "explore opportunities in a declining defence business."

The current Oshkosh board, however, sees the JLG business as an important element in the company's strategy to diversify. It said JLG had performed well in spite of unprecedented market declines, having grown to 1.7 times the size of its closest competitor and having eliminated the margin gap with its closest competitor.

The key difference between the current board's plan for Oshkosh and Mr Icahn's vision appears to be their reactions to a declining US defence spend.

The current board want to spread the focus and anticipates that in recovery an operating profit of US$500 million is achievable from its non-defence markets of access equipment, fire and emergency and commercial vehicles. This, combined with aggressive reduction in costs, organic growth through innovation and penetrating global markets are the basis of the MOVE strategy - see www.khl.com/magazines/access-international/detail/item69374/Oshkosh-shifts-focus-towards-industry/.

Mr Icahn, who is said to have supported the latter initiatives, believes that the current Oshkosh board is relying too heavily on a market recovery. He suggested that the company should use the weak market to consolidate weaker players in existing market niches and expand into new synergistic commercial markets domestically.

He wants to focus on restructuring and integrating existing operations, profitability, bidding on defence contracts and executing an organic and acquisition based growth strategy. He wants to position the company to participate in defence consolidation.

Oshkosh interaction with the Icahn Group

Oshkosh detailed the relationship with Mr Icahn from June 2011 when there was a notification of the Icahn Group's owning 9.51% of the shares in Oshkosh. Subsequent meetings with Mr Icahn followed where he noted some concerns but was said to have made statements in support of the Oshkosh strategy and management.

On October 27 October 2011 Mr Icahn asked for a waiver of the Wisconsin business combination statue (designed to protect against takeover tactics not in the interests of all shareholders) so he could buy up to 14.9% of the shares, or he would wage a proxy contest.

Failure between Oshkosh and the Icahn Group to come to a solution resulted in Mr Icahn launching his proxy contest on 4 November 2011.

On December 6 2011 Mr Icahn publically supported a merger with the commercial truck manufacturer Navistar in which he is also a shareholder.

More meetings were held and Oshkosh discussed with Mr Icahn a potential director seat, which would permit him to review the analysis which had been undertaken relating to the MOVE strategy and alternatives. Oshkosh says that Mr Icahn instead wanted to buy 20% of the company and "disproportionate" board representation.

On 6 January Mr Icahn publically suggested a transaction involving JLG and that Oshkosh aggressively seek acquisitions.

Mr Icahn has put forward six potential directors for the Oshkosh board. Shareholders have until 27 January to cast their votes.

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