Shares of Oshkosh Corp. shot up more than 14 percent Friday after billionaire investor Carl Icahn reported a 9.5 percent stake and said he was seeking talks with the specialty truck maker to enhance shareholder value.
"While near-term end market concerns continue, an activist shareholder could unlock significant value, in our view," Jefferies & Co. analyst Stephen Volkmann said in a note to clients on Friday.
He added that a split of the company's businesses, which include military vehicles and specialty trucks for construction, could be "relatively painless."
Shares of Wisconsin-based Oshkosh, which makes everything from tactical vehicles for the military to fire and emergency equipment and cement mixers, jumped more than 14 percent to $33.06 on the New York Stock Exchange, valuing the firm at more than $3 billion.
Oshkosh said in a statement late on Thursday it is open to dialogue with shareholders, adding that the firm believes Icahn's investment is "evidence of his belief in the value of the company."
Icahn, who has agitated for big changes at companies, held 9.51 percent of Oshkosh shares as of June 20, according to a Securities and Exchange Commission filing on Thursday.
A tough U.S. defense spending outlook and uncertainty over state and local budgets has weighed on Oshkosh shares this year, which are still down about 6 percent year to date despite Friday's rally.
"Currently Oshkosh is essentially trading at a depressed defense multiple with the market giving almost no credit for the construction and specialty truck related business," Jefferies' Volkmann wrote.
He added that the company's military truck business "could be attractive" as defense budget limits trigger some consolidation.
People familiar with the industry said that a split of defense and commercial businesses could be a possibility, but noted that profits from any sale of assets would remain subject to hefty taxation unless Oshkosh could find a way to spin off the entities.
It is not clear if any defense contractors would find the defense part of the company attractive, especially at a time when the United States winds down wars in Iraq and Afghanistan, these people said. But private equity firms could potentially be interested in different parts of the company, they added.
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