VW’s Traton Boosts Bid for Rest of Navistar to $3.6 Billion

Volkswagen AG’s heavy-truck business boosted its bid for Navistar International Corp., offering to buy the rest of the U.S. manufacturer for $3.6 billion.

Traton SE increased its offer to purchase the portion of stock it doesn’t already own to $43 a share, up from $35 a share offered in January, according to a statement. Navistar said its board will review the proposal, which sent the company’s shares surging as much as 20% Thursday in New York.

It’s unclear whether the sweetened offer will be enough to lure Navistar management back to the negotiating table after talks were put on hold amid the coronavirus pandemic. Bloomberg News reported last week that Traton was seeking to restart talks to win over Navistar’s management and main shareholders, which include billionaire investor Carl Icahn.

“A strategic buyout of Navistar remains an eventual outcome with a competing bid unlikely,” Christopher Ciolino, an industrials analyst for Bloomberg Intelligence, wrote in a report. VW’s minimal presence in the North American truck market and Navistar’s strong dealer network may justify an even higher offer, he said.

‘Respectable’ Returns

Traton already owns almost 17% of Navistar, trailing only Icahn, according to data compiled by Bloomberg. Its third-largest shareholder is MHR Fund Management, the hedge fund founded by Mark Rachesky, with a 16.3% stake.

The higher price would yield “respectable” returns for Icahn and MHR, Tom Narayan, an analyst at RBC Capital Markets, wrote in a report.

Officials representing the German side and Navistar had been discussing the potential range of a higher offer that would be sufficient to secure access to the target’s books, Bloomberg reported earlier. Navistar had resisted allowing due diligence because it considered the initial bid to be too low.

Strategic Rationale

VW and Traton executives earlier this year stoked doubts among investors about whether the deal would move ahead after acknowledging that talks were on hold due to the pandemic, though they said there was still strategic rationale for the combination.

Acquiring Lisle, Illinois-based Navistar would bolster VW’s competitive position against the likes of Daimler AG and Volvo AB in the commercial truck sector. VW said in a separate statement that it will provide funds for the financing of Traton’s increased offer.

VW purchased its stake in Navistar in 2017, laying the groundwork for establishing a footprint in North America, the truck industry’s largest source of profits. The target company builds International trucks, IC buses, defense vehicles and diesel engines.

©2020 Bloomberg L.P.

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