Traton a step closer to acquiring Navistar
The board of directors for Lisle-based Navistar reacted positively to a bid from VW's Traton in a letter released Friday.
"Following discussions between Navistar and TRATON, Navistar's board of directors confirmed that it would be prepared to move forward with a transaction in which TRATON would acquire Navistar for $44.50 per share in cash," the release said.
In the letter, Navistar's board asked Traton to confirm that a price of $44.50 per share is a basis for finalization of definitive agreements.
Navistar's board confirmed that an offer of $44.50 per share has the support of Navistar's two largest shareholders.
On Friday, Navistar gained $8.10 in trading, up to $43.52.
VW sees acquiring Navistar as a major step toward challenging sector leaders Daimler AG and Volvo AB on a global scale.
Its Traton unit has no direct access to the North American market, the industry's largest source of profits, and relies heavily on sales in Europe and Latin America.
Navistar in turn has little presence outside North America and is less profitable than peers including Paccar Inc. It's struggled with an ill-fated engine strategy and accounting irregularities in the past.
"The deal makes sense for both Traton and Navistar, considering their respective position and strategic ambition," said Roman Mathyssek, a Munich-based consultant at Arthur D. Little GmbH. "The offer from Traton might be the last chance for Navistar to become part of a large global manufacturer."
Billionaire investor Carl Icahn is Navistar's largest shareholder with a 16.8% stake, followed by VW with a 16.7% holding. Its third-largest shareholder is MHR Fund Management, the hedge fund founded by Mark Rachesky.
VW purchased its initial stake in Navistar in 2017 to establish a bridgehead in North America, where global rivals generate a large chunk of their sales. The Lisle-based company builds International trucks, IC buses, defense vehicles and diesel engines.
VW folded its truck operations into Traton and sold a 10% stake in an initial public offering last year. The group comprises Swedish heavy-truck specialist Scania, Germany's MAN and a smaller business in Brazil that makes commercial vehicles for emerging markets.