Forbes has a great article on Carl Icahn’s activist campaign at Oshkosh Corporation(NYSE:OSK) called Is Icahn Trying To Nickel And Dime Oshkosh? Sum Of The Parts Worth Way More, BofA Says. Icahn, who, according to the article, holds 9.5 percent of the outstanding stock, is pushing to takeover the company and possible split it up. Icahn has offered $32.50 per share for the stock he doesn’t own. Bank of America’s analysts argue that the value of OSK is between $35 and $38 per share:
Their view, they noted, is supported by the average price target analysts have on the stock, which is approximately $32. Data from Thomson One shows that out of the 14 analysts that cover Oshkosh, 8 have a “buy” or “strong buy” for the stock, with a mean price target of $32.91 and a median of $34.
That valuation excludes a change of control premium, which Bank of America estimates should be between 20% and 30% over their estimate. That would take their sum of the parts valuation to between $42 to $49 per share. “While we believe that it would be very hard to get a bidder without significant synergies at levels greater than $42/share, the current offer of $32.50 while representing a 21% premium to closing price on October 11, 2012 [sic] seems indeed too low,” they added.
The move struck me as a typical Icahn formula that he did in Clorox and CVR Energy:
1) put target in play with an offer that appears to create a price floor.
2) wait and see if other financial or strategic buyers step in with a higher bid to create more value and a liquidity event for all shareholders.
3) if step 2 fails, offer to take target private himself, provide value and liquidity to other shareholders and earn a bit more by way of a merger into one of his own entities, breaking it up himself or a combination thereof.
Research in the past has documented an Icahn price jump pre/post announcement but I wonder if one can systematically and profitably exploit the spreads on these sorts of deals and maintain a positive expected value.
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Nicely summarized. It’s an ingenious strategy developed by Icahn. Find undervaluation, and supply your own catalyst. Get taken out for a quick bump, or, after demonstrating the absence of potential competing bidders, take it private cheaply.
I’ve never seen research specific to Icahn, but there’s research on the returns to post-13D filing (abnormal and positive), and also also on 13F cloning (depending on the manager, also abnormal and positive).
Thanks for the great comment.
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