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Daimler to spin-off truck unit, sharpen investor focus on Mercedes-Benz

German automaker Daimler said on Wednesday it prepares to spin off Daimler Truck, the world’s largest truck and bus maker, as it seeks to boost its investor appeal as a focused electric, luxury car business, sending its shares up almost 9%.

Daimler’s decision to break itself up comes after the example of other German companies, such as Siemens AG, after investors pressed boards to break up conglomerates.

It also highlights efforts by the automaker to challenge Tesla Inc, Porsche, BMW, and others in the market for electric, premium vehicles.

“This pure-play luxury car company is even more attractive to investors who seek a return in that area,” CEO Ola Källenius said during a conference call Wednesday.

Källenius said he expects the standalone Mercedes-Benz business will be observed as competitive with Tesla, and over time earn a higher valuation from investors.

“It’s about transformation and winning in electric (vehicles) and car software,” he said.

A final decision on the separation will be made at an extraordinary shareholders’ meeting that could be held at the end of the third quarter and the business could be listed on the Frankfurt stock exchange by the end of this year, Daimler said.

Experts said the break-up made sense and the truck business did not add to Daimler’s share price.

Daimler Truck delivered about half a million trucks and buses to customers in 2019 and generated 40.2 billion euros ($48.34 billion) in earnings from trucks and 4.7 billion euros from buses.

In the truck market, the automaker faces traditional rivals such as Sweden’s AB Volvo, Volkswagen AG unit Traton and Paccar Inc.

It has been competing to bring to market fully-electric heavy-duty trucks to rival Tesla’s long-awaited Semi truck model.

Källenius and Daimler Trucks chief Martin Daum informed analysts on Wednesday one reason for splitting the businesses was that commercial trucks and luxury cars are pursuing various approaches to slashing carbon emissions.

Heavy truck makers are pouring money into hydrogen fuel cell technology to replace internal combustion engines. Luxury automakers are focused on batteries.

Under the planned spin-off, a significant majority stake in Daimler Truck would be distributed to Daimler shareholders.

“We have confidence in the financial and operational strength of our two-vehicle divisions,” Källenius added.

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