Volkswagen inks $3.7bn deal for Traton to buy Navistar

Frankfurt/San Francisco — Volkswagen’s board has signed off on a $3.7bn deal for its heavy-truck unit Traton to acquire Navistar International, deepening the German company’s bet on the lucrative North American market.

VW will provide Traton with a 12- to 18-month loan of €3.3bn to fund the transaction, according to a statement on Saturday.

Details of the deal, in which Traton will pay $44.50 a share for the 83% of Navistar stock it does not own, were unchanged from an announcement last month. It is expected to close in mid-2021.

Navistar, the maker of International-branded trucks, is a major player in North America. Traton has coveted the company as a means to challenge sector leaders Daimler and Volvo on a global scale. The VW unit makes Scania and MAN vehicles and is largely dependent on sales in Europe and Latin America.

VW is Navistar’s second-largest shareholder with a 16.7% stake, narrowly behind billionaire investor Carl Icahn’s 16.8% holding. MHR Fund Management, the hedge fund founded by Mark Rachesky, owns almost 16.4% of the Lisle, Illinois-based company.

While analysts have largely praised the logic of Traton’s purchase, the company has experienced how difficult it can be to integrate industrial operations after taking full control. Co-operation between Scania and MAN has been complicated for years by internal rivalries, and Traton embarked on a deep restructuring at MAN after cost-sharing projects with Scania failed to stop a dramatic erosion in earnings.

Apart from establishing a US footprint through the Navistar takeover, Traton has been building its presence in Asia. It announced a plan in October to expand an existing purchasing co-operation with Toyota Motor’s truck subsidiary Hino by adding joint work on battery-electric and fuel-cell trucks.

Bloomberg