By Christoph Rauwald, Eyk Henning, Ed Hammond and David Welch
(Bloomberg) -- Volkswagen AG offered to buy the rest of Navistar International Corp. in a $2.9 billion bid to carve out a significant share of the U.S. heavy-truck market.
VW’s Traton SE unit has offered Navistar holders $35 a share in cash, according to a statement, as reported first by Bloomberg. Navistar said its board will review the proposal and there’s no assurance the deal will take place.
Shares of Navistar, whose biggest holder is billionaire investor Carl Icahn, soared as much as 53% to $36.79 in late trading Thursday. The Lisle, Illinois-based company builds International-brand trucks, school buses, defense vehicles and engines. Wolfsburg, Germany-based VW already owns an almost 17% stake, in line with the size of Icahn’s position.
VW’s heavy-truck division has for years tried to reduce its reliance on Europe and South America to become a global competitor to industry leaders Daimler AG and Volvo AB. Traton CEO Andreas Renschler had hinted at potential interest in boosting VW’s stake in Navistar in the past, but the company mainly focused on alliances rather than acquisitions to build scale.
VW purchased its stake in Navistar in September 2016, laying the groundwork for a footprint in the North American market, the truck industry’s largest source of profits. Daimler’s Freightliner and Volvo’s Mack divisions generate significant sales in the region.
Acquiring Navistar could be a way for VW to save money as auto and heavy-truck makers prepare for a downturn after years of growth. Navistar, truck-engine maker Cummins Inc. and supplier Meritor Inc. announced thousands of job cuts late last year.
Fixer-Upper
It’s unclear whether VW’s offer will be rich enough for Icahn, 83, and Mark Rachesky, the founder and chief investment officer of MHR Fund Management, which is Navistar’s third-largest owner with a 16% stake.
Icahn, who first bought into Navistar in 2011, built his holding with an average cost per share of $33.62, and the stock has traded below that level for most of the last year. Rachesky’s average price paid was $27.80, according to data compiled by Bloomberg.
If a deal gets done, VW will take over a company in the midst of a fix-it job. Navistar said in December it will reduce employment by 10% and cut its 2020 revenue forecast to a range of $9.25 billion to $9.75 billion, below analysts’ lowest estimate. The company also trimmed its projection for earnings this year.
