FRANKFURT -- Volkswagen Group offered to buy the rest of Navistar International in a $2.9 billion bid to secure a bridgehead in the the U.S. heavy-truck market and step up its challenge to global rivals Daimler and Volvo AB.
VW’s heavy-truck division was created from acquisitions of Germany’s MAN and Sweden’s Scania. The unit had for years struggled to combine the operations before hiring former Daimler executive Andreas Renschler, who successfully spearheaded a partial listing of Traton last year.
The swoop for U.S.-based Navistar came on the same day that Volkswagen agreed to sell its industrial machinery unit Renk to private equity firm Triton Partners. The company was acquired as part of the automaker’s acquisition of MAN and represents a rare streamlining move by Volkswagen, which faces pressure amid the costly shift to electric cars.
By securing control of Navistar, which builds International-brand trucks, school buses, defense vehicles and engines, Traton would reduce its reliance on Europe and South America and be better positioned to take on Daimler and Volvo, which already have large operations in the U.S. market.
VW already owns a stake of almost 17 percent in Navistar. VW bought the stake in September 2016, laying the groundwork for a footprint in the North America, 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 and supplier Meritor announced thousands of job cuts late last year.
Navistar's biggest holder is billionaire investor Carl Icahn. 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 percent 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.
Shares of Navistar soared as much as 53 percent to $36.77 in premarket trading Friday. Volkswagen declined 0.7 percent to 162.80 euros at 9:07 a.m. in Frankfurt on Friday.