Daimler Is Near Decision to Examine IPO of Truck Unit
(Bloomberg) -- Daimler AG, the maker of Mercedes-Benz luxury cars, is nearing a decision to formally move ahead with a potential initial public offering of its massive heavy-truck unit, people with knowledge of the matter said.
The German group’s supervisory board is set to meet Wednesday and discuss whether to pursue a separate listing of the business, according to the people. Daimler could sell a minority stake in the unit through an IPO as soon as the second half of the year if it decides to proceed, the people said, asking not to be identified because the information is private.
Any deal would be one of the year’s biggest German share sales and would build on Daimler’s adoption of a new corporate structure giving more independence to its main divisions. Investors have for years urged Daimler to go a step further and consider a separate listing of the trucks operation, which is one of the world’s largest producers of commercial vehicles.
The deliberations on a potential listing are ongoing and there’s no certainty Daimler will decide to proceed, the people said. A spokesman for Daimler declined to comment.
Daimler shares rose as much as 2.8% to 60.92 euros shortly after the start of regular trading in Frankfurt. The stock advanced 17% last year.
Daimler’s truck unit could be worth about 29 billion euros ($35 billion) if valued at multiples similar to Volvo AB, although it would need to substantially improve returns to justify that valuation, Deutsche Bank analysts wrote in a January report. Sanford C. Bernstein estimated Wednesday that the business could be worth 35 billion euros.
“We are firmly convinced that both Daimler’s commercial and premium vehicle businesses will be much better run with more transparency and accountability,” Bernstein’s Arndt Ellinghorst wrote in a report.
It could be an opportune time for the listing. Volvo reported surging orders along with better-than-expected quarterly profit Wednesday and said transport and construction activity has fully recovered in most markets, improving customer confidence. The Swedish company boosted its forecast for Europe and North America’s heavy-duty vehicle sales this year by a combined 90,000 units.
Daimler officials have ruled out a complete sale of individual divisions but kept the door open to a partial listing of the trucks unit. The business sells more heavy-duty trucks annually than global rivals, though its returns have for years trailed Volvo and other peers.
German rival Volkswagen AG pushed through an IPO of its Traton SE trucks unit in 2019, and the business now has a market value of about 11.6 billion euros. Traton agreed last year to acquire Navistar International Corp. to challenge Daimler and Volvo in North America, the industry’s biggest source of profits.
Daimler’s truck division contributed 40.2 billion euros of revenue in 2019, according to the company’s annual report. It sold 488,521 vehicles worldwide and generated 2.46 billion euros in earnings before interest and taxes that year. While the North American Freightliner brand posts robust profits, the European operations have gone through multiple rounds of restructuring.
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