Is Stewart & Stevenson Still In Play?

Posted on April 7, 2006

The Milwaukee Journal-Sentinel is reporting that activist shareholders are pressing the board of Stewart & Stevenson Services Inc. to entertain further offers for the company - a move that could help pry open the door for a renewed acquisition attempt by Oshkosh Truck Corp.

The newspaper said that, Oshkosh Truck submitted the high bid for Stewart, a key competitor on military contracts, in late February. Stewart & Stevenson board rejected the $35.50-a-share offer, saying it feared regulatory problems could delay or block a purchase by the Wisconsin firm.

Instead, the Stewart & Stevenson board accepted a $35-a-share, $755 million offer from Armor Holdings Inc. of Jacksonville, Fla., military armor manufacturer At the time, the identities of Oshkosh and another unsuccessful bidder were kept confidential, the daily paper reported on April 7th.

There things stood until last week, when Oshkosh released a statement, revealing itself as a bidder for Stewart. That, said analyst Stephen E. Levenson of Ryan Beck & Co., New York, was a highly unusual move.

"I've never seen that before, and I've been doing this for 20 years," he told the Milwaukee newspaper.

Levenson and other investment professionals interpreted the Oshkosh statement in the same way: Without directly saying so, the company was signaling to Stewart stockholders that, despite the board action, Oshkosh was still a potential buyer, and at a higher price.