Volkswagen Unit Considering Full Takeover of Truck Maker Navistar -- 3rd Update

Date : 04/16/2018 @ 11:17AM
Source : Dow Jones News
Stock : Navistar International Corp. (NAV)
Quote : 38.27  0.06 (0.16%) @ 11:11AM

Volkswagen Unit Considering Full Takeover of Truck Maker Navistar -- 3rd Update

Navistar (NYSE:NAV)
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By William Boston 

Volkswagen AG's commercial-vehicles unit said it is considering a full takeover of Navistar International Corp., one of America's largest truck makers with a market value of nearly $4 billion -- an ambitious move for the German auto maker just days after naming a new chief executive.

Volkswagen Truck & Bus GmbH already owns just shy of 17% of Illinois-based Navistar and officials at the unit said Monday it could raise that stake or even launch a full takeover.

The suggestion comes amid huge upheaval at Volkswagen. The company's board ousted Matthias Müller as CEO last week, replacing him with Herbert Diess, and reshuffled several executive board posts. Upon taking control Friday, Mr. Diess vowed to accelerate the pace of change at Volkswagen, including a potential stock market listing of its trucks business.

It also comes at a politically sensitive time for the German auto industry. U.S. President Donald Trump has repeatedly accused Europe of using what he characterizes as unfair international trade rules to flood the American market with imported vehicles. A charge German car companies refute.

Talking to reporters Monday, Volkswagen Trucks CEO Andreas Renschler suggested a full takeover of Navistar would be "a good idea" as the company builds out its global strategy ahead of a possible initial public offering.

Finance chief Matthias Gründler said the company could use proceeds from an IPO to fund the acquisition but also suggested it could mount a takeover beforehand, saying financing such a deal would be "manageable."

Navistar, whose shares rose nearly 6% on the news, said the comments were speculation but noted its alliance with Volkswagen was "demonstrating strong progress."

Navistar is the successor company to International Harvester, whose roots go back to the Cyrus McCormick's invention of the mechanical reaper for farm crops in 1831. International Harvester was dismantled during the 1980s, leaving Navistar as a company focused on trucks, engines and school buses.

Its International brand is well-known throughout the North American trucking industry and the company has an extensive network of dealers and service shops, which would be a key asset for Volkswagen. It generated $30 million of net income on revenue of $8.6 billion last year and has a near 12% share of the U.S. market for heavy trucks.

Volkswagen Trucks acquired a 16.6% stake in Navistar for about $256 million in 2016, a cornerstone of its global expansion strategy that gave the German truck maker a foothold in the U.S. as well as in Mexico and Canada. The North American Free Trade Association area is the largest truck market in the world by sales.

Volkswagen Trucks now holds about 16.9% of Navistar, Mr. Gründler said, adding that if the company lifted its stake above 17% it would be required under U.S. securities law to make an offer for the rest of the company.

Such a move would likely be welcomed by investors ahead of the IPO. Some analysts have encouraged Volkswagen Trucks to buy Navistar.

Navistar's debt and unfunded pension liability total billions of dollars, likely diminishing the price that Volkswagen would be willing to pay for the rest of the U.S. company.

Volkswagen Trucks was created in 2015 to consolidate Volkswagen's holdings in MAN trucks, Scania AB and Brazilian commercial-vehicles group Caminhoes Onibus. Volkswagen poached Mr. Renschler, the architect of rival Daimler AG's truck business, to build the company into a global business.

Through its MAN unit Volkswagen Trucks holds a 25% stake in Hong Kong-based Sinotruck Ltd., one of China's largest commercial-vehicle manufacturers.

Last week, Volkswagen Trucks and Japan's Hino Motors Ltd. unveiled plans to form an alliance that is likely to see the companies jointly develop commercial vehicles for the Japanese and Southeast Asian markets. The partners hope to benefit by sharing development and procurement costs.

"That's one of the reasons for the strategic alliance. We only have to spend money once, as opposed to twice or three times," Mr. Renschler told reporters last week in Tokyo.

Hino is owned by Toyota Motors Co. Initially, the venture won't jointly produce trucks and the companies say Volkswagen has no immediate plans to acquire a stake in Hino.

--Robert Tita, Markus Klausen and Sean McLain contributed to this article.

Write to William Boston at william.boston@wsj.com

 

(END) Dow Jones Newswires

April 16, 2018 11:02 ET (15:02 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.

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