Billionaire investor Carl Icahn wants Navistar International Corp to consider merging with rival Oshkosh Corp , though he has not yet made a formal proposal to either company, several people familiar with the situation said.

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 that he had held talks with management to discuss its business strategies and would 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 the expensive 2006 acquisition of JLG Industries, jumped 8 percent to $19.87 on the New York Stock Exchange on Friday, valuing the company around $1.8 billion.

Navistar shares rose 3.5 percent to $41.50, valuing the company at over $3 billion. The stock has fallen some 30 percent this year.

We like Navistar's prospects with or without a shotgun wedding, but it definitely would benefit from the increased scale and synergies that would materialize if it bought Oshkosh, Gimme Credit analyst Vicki Bryan said in a research note on Friday.

AT OSHKOSH

While Icahn is seeking board representation and discussions on business strategies with Navistar, his plans at Oshkosh have been less clear. He has not sought board representation there so far, and has agreed with Oshkosh management's view about conserving cash amid an uncertain defense outlook, according to people familiar with the situation.

There could be a potential conflict if Icahn attempted to gain board representation also at Oshkosh, since the two companies compete in the same industry, these people said.

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 downturn in the defense sector that many analysts are predicting.

Icahn did not return a request for comment. Oshkosh declined to comment on relationships with Icahn and other shareholders.

Navistar Chief Executive Dan Ustian said in an interview with Fox Business on Tuesday that 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, Oshkosh shares were trading in the mid teens.

The corporate raider-turned-activist has had some high-profile disappointments this year in fights at Lions Gate Entertainment Corp , Clorox Co and Forest Laboratories Inc .

But Icahn was also the biggest individual holder of El Paso Corp , which agreed to be bought by Kinder Morgan Inc earlier this week.

He also saw his years-long investment in Motorola turn around earlier this year when Google Inc agreed to buy Motorola Mobility Holdings Inc for $12.5 billion.

(Reporting by Soyoung Kim, John D. Stoll and Paritosh Bansal, editing by Dave Zimmerman and Gerald E. McCormick)

Carl icahn