Carl Icahn, the largest shareholder in Oshkosh Truck Corp. [OSK], on Friday continued to promote his slate of nominees for the company’s board of directors at its annual shareholders’ meeting later this month after the company’s leadership sent a letter last Tuesday once again asking shareholders to reject the iconic investor activist’s candidates.
Even if he’s successful in getting all six of his nominees on the Oshkosh board at the Jan. 27 meeting, Icahn would still only have a minority position with the directors as the company has a 13-member board, including Richard Donnelly, chairman, and Charles Szews, president and CEO.
Still, in a Dec. 15 filing with the Securities and Exchange Commission, Icahn’s company, Icahn Associates, said its nominees “expect to be able to actively engage other board members in full discussion of the issues facing the company and…can effect positive change at the company.”
In his letter Friday, Icahn criticized Oshkosh’s leadership for promoting past successes to the company’s shareholders as the reason for sticking with their board despite struggles with the business the past few years.
Icahn said that in their Jan. 3 letter, Donnelly and Szews point to a three-year return of 45 percent to shareholders on the company’s stock, but pointed out that that was when shares were trading at $35 early in 2011. Now Oshkosh trades in the low $20s, Icahn pointed out.
“The company is also one of the worst performing among its peers in stock performance over the past five years, and the worst in terms of 2012 projected earnings growth,” Icahn wrote on Friday. He also slammed the company for touting its elimination of $2 billion in debt over the past three-plus years, saying the debt went to pay for an acquisition of a firm “whose earnings subsequently went to zero.”
In their Jan. 3 letter, Donnelly and Szews urge Oshkosh shareholders to reject Icahn’s board nominees and said that despite multiple meetings with him, Icahn “has provided no substantive ideas or analyses to enhance value for all shareholders,” adding that he “may not be certain of his intentions for Oshkosh.”
In his rebuttal, Icahn said Oshkosh’s strategy is “wait and see” on a recovery. Icahn said he would explore acquisitions around core businesses, consolidate “niche” businesses in the current weak economy while entering “new synergistic product lines,” integrate and restructure existing operations, and be willing to be a buyer and or a seller in the coming defense industry consolidation.
Oshkosh makes trucks for commercial, civil and military uses. The company has struggled with the downturn in the global economy and in the defense business has suffered from what many considered a low bid to wrest a key Army truck program away from long-time incumbent Britain’s BAE Systems. Oshkosh is also having technical difficulties with that program, the Family of Military Tactical Vehicles.
Icahn, who also owns about 10 percent in truck maker Navistar [NAV], has said there are synergies between the two companies that could result from a merger. Navistar is primarily a commercial truck firm with its defense exposure becoming more limited due to the ending of the wars in Afghanistan and Iraq and the wind down of the Mine Resistant Ambush Protected program.
Benchmark Capital analyst Josephine Millward sees little in the way of defense synergies between the two companies given Navistar’s dwindling defense work and believes the Army might say no to a merger.
“We expect further cuts to military truck funding and delays in key opportunities, and we do not think it would be beneficial for Navistar to expand its DoD presence from the current 20-plus percent of its revenue mix,” Millward said.
Icahn is expected to release more detail this week on why his nominees for the Oshkosh board should be elected. The nominees are A.B. Krongard, Vincent Intrieri, Samuel Merksamer, Jose Maria Alapont, Daniel Ninivaggi, and Marc Gustafson.