Volkswagen Truck & Bus buying stake in Navistar for $256M

Volkswagen will pay $15.76 a share for 16.2 million new Navistar shares, a 12 percent premium to Navistar's closing price on September 2, the two groups said.

"I feel very feel comfortable with our liquidity position and even more comfortable with it with this deal", he noted on the call.

Clarke told Fleet Owner telematics represents another big potential area of cooperation and savings for both Navistar and VW. "Starting in the near term, this alliance will benefit our purchasing operations through global scope and scale".

The company's chief executive Troy Clarke said: "Over the longer term, it is meant to expand the technology options we are able to offer our customers by leveraging the best of both companies".

Volkswagen AG also holds interests in MAN, Scania and Caminhões e Ônibus truck brands.

Gaining traction in the US heavy-truck market, dominated by Daimler AG, Volvo AB and Paccar Inc., is key to VW's plan to forge a global commercial-vehicle operation with higher profit margins than rivals. "The strategic alliance with Navistar is an important milestone and will be very beneficial for both sides".

Volkswagen Truck & Bus is buying a minority stake in IL based Navistar. "This alliance marks another step in Navistar's journey to be a stronger, more profitable company". Icahn's fund spent $500 million amassing the stake at an average price of $30.84 a share. Navistar will receive $256M from the equity investment to be used for general corporate purposes.

Additionally, Volkswagen Truck & Bus and Navistar have agreed to establish a procurement joint venture that will pursue joint global sourcing opportunities.

Stephen Volkmann, analyst at Jefferies, said that by buying a smaller stake in Navistar, Volkswagen "perhaps wants to dip a toe in the water rather than get completely wet", but he expects the German automaker to eventually buy the rest of the truck maker. But he also stressed that Navistar's relationship with Cummins remains, referring to the engines as an "outstanding product" that continues to gain traction with customers. Navistar's market share has tanked since its pollution-control technology failed to meet industry standards and brought the company to the brink of collapse.

Shares of Navistar (NAV) surged Monday after Volkswagen (VOW3-DE) agreed to form a strategic alliance to supply engines to the USA truck maker. This enhanced collaboration will enable the alliance to share the overall costs associated with future vehicle development. Technology sharing with an emphasis on powertrain technology is also part of the deal.

The German automotive giant's purchase comes with a joint procurement agreement that could reshape Navistar's supply chain. Volkswagen Truck & Bus was advised by Rothschild as financial advisor, and Davis Polk & Wardwell LLP, CMS Germany and Bär & Karrer as legal advisors.

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