Volkswagen buys a stake in Navistar

7 September 2016

Navistar International Corporation announced a strategic alliance agreement with Volkswagen Truck & Bus, which includes an equity investment in Navistar by Volkswagen, as well as technology and supply collaboration and a procurement joint venture.

Under the agreement, Volkswagen will acquire 16.2 million newly issued shares in Navistar, representing 16.6% of post-transaction undiluted common stock (or 19.9% of pre-transaction outstanding common stock). It will pay $15.76 per share or a 25% premium over Navistar’s 90-day average price as of August 31, 2016, or 12% over Navistar’s closing price on September 2, 2016. Navistar will receive $256 million from the equity investment. Volkswagen Truck & Bus has agreed to hold these shares for a minimum of three years. Reflective of its shareholding post-transaction, Volkswagen will have the right to appoint two directors to Navistar’s board of directors.

The technology sharing partnership will focus on powertrain technology. The companies will also explore collaboration in other aspects of commercial vehicle development, including advanced driver assistance systems, connected vehicle solutions, platooning and autonomous technologies, electric vehicles, and cab and chassis components.

The Phase 2 GHG emission and fuel efficiency standards, recently finalized by the US EPA and NHTSA, have put additional pressure on Navistar to find a technology development partner. Navistar—along Cummins, Daimler and Volvo—has been selected to receive the US DOE SuperTruck II funding for the development of truck efficiency technologies, but the company is the only participant of the program who has not yet achieved the original SuperTruck efficiency targets.

Navistar and Volkswagen will also establish a procurement joint venture that will help source parts for both companies. The procurement joint venture is expected to leverage the purchasing power of Volkswagen’s three truck brands—Scania, MAN and Volkswagen Caminhões e Ônibus—in addition to Navistar’s own International® and IC Bus brands, providing Navistar with enhanced global scale.

Navistar expects significant synergies from both the technology collaboration and the procurement joint venture. The company expects the cumulative synergies for Navistar to ramp up to $500 million over the first five years.

Source: Navistar