Icahn-Backed Navistar Surges as Buyout by VW Looks `Imminent'

(Bloomberg) -- Navistar International Corp., the truckmaker in the midst of an ambitious turnaround, may be fixing itself just in time for a takeover by Volkswagen AG.

Volkswagen, already just behind billionaire investor Carl Icahn among Navistar’s largest shareholders, may consider boosting its stake from 16.9 percent, according to Matthias Gruendler, the chief financial officer of the German giant’s truck and bus division. Navistar shares surged as much as 12 percent, the biggest jump in almost four months.

A takeover “would theoretically be possible,” Gruendler said Monday during a press conference in Munich. He outlined a potential price tag of about “3 billion to 4 billion,” without specifying dollars or euros. While he declined to comment on a possible time frame for a deal, he said cooperation between the two manufacturers is developing “very well.”

VW began accelerating efforts to forge the world’s most profitable heavy-truck producer three years ago, when it decoupled its commercial-vehicle operations from the larger passenger-car business just before that unit’s emissions-cheating scandal emerged. It bought its Navistar stake in 2016 to gain a foothold in North America, where Daimler AG makes Freightliner vehicles and Volvo AB owns the Mack brand.

Buying out Navistar would further VW’s efforts to build scale and better compete with those rivals. Shares of Lisle, Illinois-based Navistar climbed 10 percent as of 2:25 p.m. in New York after rising earlier by the most intraday since Dec. 19.

VW’s truck unit, which has already announced plans with Navistar to bring an all-electric medium duty truck to market as soon as next year, has been considering a potential initial public offering. Any purchase of Navistar could be funded by parent VW and wouldn’t depend on the offering taking place, Gruendler said.

‘Major Hole’

Robert W. Baird analyst David Leiker predicts VW’s truck unit will do an IPO next year, with a possible Navistar purchase “filling a major hole” in its footprint ahead of time. VW can increase its stake to 19.9 percent before needing approval from Navistar’s board to acquire more, he said in a report to clients Monday.

“We believe a buyout is increasingly imminent,” Leiker said. “Ultimately, for VW Truck & Bus to offer a compelling investment opportunity for investors, it needs to be a global commercial vehicle OEM that can compete with the likes of Daimler Truck & Bus and Volvo Truck.”

An IPO for the truck and bus unit “is just one of the options” the division is considering to access more capital, Andreas Renschler, head of the VW truck and business, said in an interview. The unit could also sell bonds, he said.

Navistar declined to comment on VW potentially purchasing a larger stake. The companies’ year-old alliance “is already demonstrating strong progress” and is set for “continued success,” Lyndi McMillan, a company spokeswoman, said in an email.

VW Growth

Renschler also outlined global growth plans at the briefing Monday including boosting sales in China and sharing costs across its MAN, Scania and Brazilian VW commercial-vehicle operations through joint procurement and development of parts. The truck division’s preparations for an IPO or debt sale will take 12 months, and MAN’s Diesel & Turbo engine and Renk industrial-equipment units will be shifted from the business to parent Volkswagen, executives said.

The revamp of VW’s heavy-vehicle division, which Evercore ISI estimates has as much as 30 billion euros in assets, marks the most significant structural shift so far for Volkswagen as it retools for massive change across its industry. The Wolfsburg, Germany-based manufacturer appointed Herbert Diess, head of its namesake auto brand, as its new chief executive officer last week, and he pledged to accelerate decision-making across the group to adapt to rapid shifts in technology and competition.

VW Chairman Hans Dieter Poetsch told reporters on Friday the company will retain a controlling stake in the commercial-vehicle business and that a share sale may not happen until 2019, as it still requires final approval.

To contact the reporters on this story: Christoph Rauwald in Munich at crauwald@bloomberg.net, John Lippert in Chicago at jlippert@bloomberg.net.

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Craig Trudell at ctrudell1@bloomberg.net, Anne Riley Moffat

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