NAV Navistar International Corp

By William Boston 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (April 17, 2018).

Volkswagen AG's commercial-vehicles unit is considering a full takeover of Navistar International Corp., one of America's largest truck makers, just days after the German auto maker named a new chief executive.

Volkswagen Truck & Bus GmbH already owns close to 17% of Navistar, an Illinois-based company with a market value of nearly $4 billion. Officials at the VW unit said Monday it is looking at whether to raise that stake or even launch a full takeover.

The suggested move comes amid upheaval at Volkswagen. The company's board ousted Matthias Müller as CEO last week, appointing VW brand chief Herbert Diess as his successor, and shuffled several executive board posts. Upon taking control Friday, Mr. Diess vowed to accelerate the pace of change at Volkswagen, including a potential stock-market listing of its trucks business.

It also comes at a politically sensitive time for the German auto industry. U.S. President Donald Trump has accused Europe of using what he characterizes as unfair international trade rules to flood the American market with imported vehicles. German car companies rebut that charge.

In a talk with reporters on Monday, Volkswagen Trucks CEO Andreas Renschler said a full takeover of Navistar would be "a good idea" as the VW unit builds out its global strategy ahead of a possible initial public offering of stock.

The unit's finance chief, Matthias Gründler, said the company could use proceeds from an IPO to fund the potential acquisition but also suggested it could pursue a takeover beforehand, saying financing such a deal would be "manageable."

Navistar said the comments were speculation, but added that its alliance with Volkswagen was "demonstrating strong progress."

Shares in Navistar were up 11% on the New York Stock Exchange early Monday afternoon.

Navistar is the successor company to International Harvester, whose roots go back to Cyrus McCormick's invention of the mechanical reaper for farm crops in 1831. International Harvester was dismantled during the 1980s, leaving Navistar as a company focused on trucks, engines and school buses.

Its International brand is well-known throughout the North American trucking industry. The company has an extensive network of dealers and service shops, which would be an important asset for Volkswagen. It generated $30 million of net income on revenue of $8.6 billion last year and has a nearly 12% share of the U.S. market for heavy trucks.

Volkswagen Trucks acquired a 16.6% stake in Navistar for about $256 million in 2016, a cornerstone of its global expansion strategy that gave the German truck maker a foothold in the U.S. as well as in Mexico and Canada. The North American Free Trade Association area is the largest truck market in the world by sales.

Volkswagen Trucks now holds about 16.9% of Navistar, Mr. Gründler said, adding that if the company lifted its stake above 17% it would be required under U.S. securities law to make an offer for the rest of the company.

Investors would likely welcome such a move ahead of an IPO. Some analysts have encouraged Volkswagen Trucks to buy Navistar.

Navistar's debt and unfunded pension liability total billions of dollars, likely diminishing the price that Volkswagen would be willing to pay for the rest of the U.S. company.

Volkswagen Trucks was created in 2015 to consolidate Volkswagen's holdings in MAN trucks, Scania AB and Brazilian commercial-vehicles group Caminhões Ônibus. Volkswagen poached Mr. Renschler, the architect of rival Daimler AG's truck business, to build the company into a global business.

Through its MAN unit, Volkswagen Trucks holds a 25% stake in Sinotruk (Hong Kong) Ltd., one of China's largest commercial-vehicle manufacturers.

Last week, Volkswagen Trucks and Hino Motors Ltd. of Japan said they plan to form an alliance to develop commercial vehicles for the Japanese and Southeast Asian markets. The partners hope to benefit by sharing development and procurement costs.

Hino is owned by Toyota Motors Co. The venture will cooperate on research and development initially, but not production. The companies also said Volkswagen has no immediate plans to acquire a stake in Hino.

--Bob Tita, Markus Klausen and Sean McLain contributed to this article.

Write to William Boston at william.boston@wsj.com

(END) Dow Jones Newswires

April 17, 2018 02:47 ET (06:47 GMT)

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