By Soyoung Kim, John D. Stoll and Paritosh Bansal
Icahn, who has amassed 10 percent stakes in each of the companies, is currently in discussions with Navistar about getting one or more seats on the board of the U.S. truck and engine maker, these people said.
Icahn reported his stake in Navistar last week and said at the time he has held talks with management to discuss its business strategies and will seek additional conversations.
A deal, however, is far from certain. It's not clear whether either of the companies would be open to the idea and it remains to be seen how effective Icahn would be in getting what he wants at these companies.
Shares of Oshkosh, which have nearly halved this year as the company struggles with a declining defense business and an expensive 2006 acquisition of JLG Industries, jumped 6.6 percent to $19.62 on the New York Stock Exchange on Friday, valuing the firm at nearly $1.8 billion.
Navistar shares rose 2.6 percent to $41.16 in early trading, valuing the company at about $3 billion. The stock has fallen some 30 percent this year.
A Navistar-Oshkosh combination has long been talked about as a possibility in the industry as the two companies can wring out costs and excess capacity. There are also some complementary units such as Navistar's finance and engine making businesses that could benefit from a merger.
Oshkosh investors have been concerned about the company's exposure to defense contracts due to government-spending cutbacks and increased competition, including the threat posed by Navistar's own plan to grow in the sector.
Tying up with another player in the heavy-vehicle industry could protect Oshkosh from a secular downturn in the defense sector that many analysts are predicting.
Icahn did not return a request for comment. Oshkosh and Navistar declined to comment on relationships with Icahn and other shareholders.
A Navistar spokesperson referred to remarks its chief executive Dan Ustian made in an interview with Fox Business on Tuesday. In that interview, Ustian said Icahn "is into (Navistar) to make some money... We have to deliver to him and all our other investors."
Icahn purchased his Oshkosh stake in June, when shares in the Wisconsin company were trading considerably higher.
Shares in mid-June, prior to Icahn's disclosure, were trading near $25 a share. By the time he started snapping up Navistar, shares were trading in the mid teens.
(Reporting by Soyoung Kim, John Stoll and Paritosh Bansal, editing by Dave Zimmerman)