Carl Icahn today issued the following open letter to shareholders of Oshkosh
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.
How Warren Buffett Uses Discount Rates To Value Stocks
Warren Buffett has never detailed the process he uses to value the businesses he acquires for Berkshire Hathaway. However, over the years, he has provided some limited insight into his methods. Q3 2020 hedge fund letters, conferences and more Based on these comments, it is widely assumed that Buffett uses a discount cash flow model Read More
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
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
– “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
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
– 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
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
I urge shareholders to VOTE THE GOLD CARD FOR ALAPONT, GUSTAFSON, INTRIERI,
KRONGARD, MERKSAMER AND NINIVAGGI to send a message to the company and deliver
the necessary change to take Oshkosh into the future. If you have already voted
the white card, you can still change your vote by now VOTING THE GOLD card.
Carl C. Icahn