Market Overview

UPDATE: Carl Icahn Issues Open Letter to Shareholders of Oshkosh Corporation


Carl Icahn today issued the following open letter to shareholders of Oshkosh Corporation:

Dear Fellow Oshkosh Shareholders,

The Oshkosh Annual Meeting will take place Friday, January 27, 2012. Your vote is important as Oshkosh is at a critical juncture and I believe that my six director nominees have the necessary skills, experience and objectivity to help fix the problems at Oshkosh. I think change is necessary and crucial for the future success of Oshkosh.

In a recent letter from the Oshkosh Chairman and from the CEO, the company argues that they should be supported due to a 3-year total shareholder return of 45%. I find this to be absurd since during this time period the total enterprise value of Oshkosh decreased by approximately $500 million, from $3.1 billion to $2.6 billion.

Additionally, I am not sure why this management team feels that their past stock performance is an attribute for which they are owed loyalty, considering Oshkosh was trading at $35 per share at the start of 2011 and now trades in the low $20s. The company is also one of the worst performing among its peers in terms of stock performance over the past five years, and the worst in terms of 2012 projected earnings growth.

The board feels that it is useful to list all of the actions they have taken "In the face of unprecedented market challenges" without mentioning their current dire situation in terms of falling profitability and low share price. They have curiously focused on items that are old news such as:

"Achieved the #1 or #2 brands in virtually all of its markets" – though this has not changed for years and was primarily accomplished by acquisitions. "Developed innovative, profitable products like the M-ATV" – which is now at the end of its production cycle. "Reduced debt by approximately $2 billion" – We believe this debt never should have been incurred in the first place. It was used to fund the acquisition of a company whose earnings subsequently went to zero. Management then had to seek waivers under this debt to avoid a potentially disastrous default. Management is now asking for shareholders to be grateful that they have paid down this debt. "Cut approximately $200 million in costs in fiscal 2009" – IT IS NOW FISCAL 2012. I believe this is one of the major problems with the incumbent management and board; they are congratulating themselves for actions taken in the past rather than addressing challenges the company faces in the present and future.

The board has suggested that I confirmed at a meeting with management that I do not understand the defense business. This only confirms my belief that they did not understand me in the first place. Irrespective of any apparent miscommunication, there is one thing I do understand about the defense business – defense contractors should charge their customers a price in excess of their cost which is a concept that seems to me to be lost on the Oshkosh board and management given the recent experience with the FMTV contract.

The board is also alleging that I have provided no substantive ideas to enhance shareholder value. After reviewing the details surrounding the MOVE strategy, I firmly believe that their strategy provides no substantive ideas to proactively enhance shareholder value. To put it differently, I believe that their strategy represents the same "wait and see" approach to a recovery which the board has been implementing for years. Shareholders deserve a real plan to deliver value TODAY centered on the following:

Immediately explore alternatives for JLG to reallocate capital to debt reduction, returning capital to shareholders and providing opportunities to pursue a more active acquisition strategy surrounding core businesses. Capitalize on a weak economy by consolidating existing niche businesses and entering new synergistic product lines rather than waiting to see how the economy progresses. Aggressively seek small acquisitions and joint venture opportunities in core product areas to develop a comprehensive international growth strategy. Position the company to participate in coming defense industry consolidation as both a buyer and/or a seller. Integrate and restructure existing operations to maintain profitability, and if the current management is not willing or capable of executing such a restructuring, finding a management team that will. I believe that my nominees have excellent operational and financial qualifications and that their experience would be extremely beneficial to Oshkosh and its shareholders to move this company to develop a value enhancing strategy.

Posted-In: News


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