After Carl Icahn Will Oshkosh Turn To China?

Carl Icahn has given up on his bid to buyout Oshkosh Corporation (NYSE:OSK) after less than 25 percent of the company’s shares were tendered before the deadline he had set expired. Icahn fell just short of that number with 22 percent of shares tendered. The bid valued the company with a market cap of $2.6 billion at $3 billion. Carl Icahn in late October owned 9.5% of the truck maker, but now he has slashed his stake to 4,263,043 shares, or 4.66% of the company.

Carl Icahn revealed the sale of shares in two 13Ds filed with the SEC yesterday. Known for his activism and proxy wars, it is not rare to for Carl Icahn to file two 13Ds in one day, however, both these 13Ds were related to Oshkosh Corporation (NYSE:OSK). Carl Icahn has been continuously selling shares of the company and now with under 5% ownership, he may not be required to disclose further sales. However, it would appear that Carl Icahn is selling shares as quickly as he can.

Opportunity in China?

China’s State Council recently encouraged the development of 82 new airports – plus the expansion of 101 existing airports – by the year 2015. So far this year 24 projects have been approved, with an estimated total investment of nearly $16 billion USD. While some of these airports may prove too small and/or unsophisticated to consider purchasing Oshkosh Corporation (NYSE:OSK)’s advanced firetrucks, recent history suggests that China is indeed a willing buyer. The opportunity could be significant, given selling prices that can exceed $1m per vehicle, depending on the configuration.

OSK is clearly committed to the Chinese market, with AWP manufacturing capabilities and a well-staffed presence at last week’s “bauma
China 2012” trade show. However, at roughly 1,000 units per year, the entire Chinese market is about the same size as the Singaporean market, and only half as large as the Hong Kong market – despite the fact that, respectively, these geographies are home
to only 0.39% and 0.53% as many people as mainland China.

Behavioral inertia among contractors, a lack of safety regulations, and at least a 10x ASP differential (vs. traditional scaffolding) act as barriers to AWP adoption. At this point it is difficult to foresee a catalyst that could potentially alter this dynamic.

For the fiscal year ended 30 September 2012, Oshkosh Corporation revenues increased 8% to $8.18B. Net income before extraordinary items decreased 17% to $230.5M. Revenues reflect Access Equipments segment increase of 44% to $2.79B, Commercial segment increase of 34% to $669.6M, Fire and Emergency segment increase of 1% to $769.4M, Middle East segment increase of 40% to $974.9M, Other segment increase of 34% to $560.7M.

Whether the failed tender offer by Icahn is good or bad for Oshkosh, and whether the company can grow revenue in China remains to be seen, but what is certain, is that Icahn will likely have little part in the company’s future.

Disclosure: No position