Volkswagen AG’s truck unit Traton SE has agreed to pay $3.7 billion for the outstanding shares of American truck maker Navistar International in a deal announced on Saturday that would expand its reach in North America.
Since March 2017, Traton and Navistar have worked together with a strategic alliance that has delivered significant value to both truck makers through increased purchasing scale and the integration of recent technologies.
Finalization of the deal comes after Traton said on October 16 it had agreed to raise its bid for Navistar to $44.50 per share, increasing from $43, as it closed in on an acquisition that would establish a global manufacturer.
The agreement which brings Navistar together with the MAN, Scania, and Volkswagen truck brands is in line with trends in the truck industry which has been finding ways to share the costs of developing low emissions technology.
Traton already owns a 16.7% stake in Navistar and at the boosted offer price Traton would be paying about $3.7 billion for the shares in Navistar it doesn’t already own, making the U.S. business as a whole to be valued at around $4.4 billion.
Significant shareholders in Navistar including Icahn Capital LP and MHR Fund Management LLC have agreed to vote in support of the deal, the U.S. truck maker said in a separate statement.
“Volkswagen is TRATON’s biggest shareholder. The agreement is thus an important milestone for Volkswagen because it underpins our strong strategic commitment to continue driving growth also during the ongoing challenging economic climate. The acquisition of Navistar will significantly leverage TRATON’s positioning in North America, one of the biggest and most profitable markets for heavy trucks. Together, the companies can enhance scale and reach in key markets as well as create further synergies,” said Gunnar Kilian, member of the Board of Management of Volkswagen AG and responsible for the Truck & Bus division.
The Volkswagen group will give Traton a loan of 3.3 billion euros ($3.92 billion), repayable over 12-18 months, to fund the deal.