By William Boston 

BERLIN -- Daimler AG plans to spin off its trucks business in a move highlighting how conventional auto makers are under pressure to boost their stock market value.

Daimler said Wednesday it would hand over a "significant majority" of shares in Daimler Trucks to its existing shareholders by the end of the year and would eventually rename the car-making business Mercedes-Benz, which in future would focus on developing luxury electric cars and automotive software.

Investors applauded the news, driving Daimler's shares up nearly 9% in late afternoon trading in Frankfurt.

Echoing arguments that investors have made for years, Daimler Chief Executive Ola Källenius said the two companies were very distinct, with a different set of customers, as well as different technologies and financial requirements.

"Both companies operate in industries that are facing major technological and structural changes. Given this context, we believe they will be able to operate most effectively as independent entities," Mr. Källenius said in a statement.

An extraordinary shareholders meeting is planned for the end of the third quarter to seek approval for the separation.

As the automotive industry pivots toward electric vehicles, conventional manufacturers of passenger cars and commercial vehicles have seen investors flock to upstarts such as Tesla Inc. and electric-truck maker Nikola Corp. and mobility service providers such as Uber Technologies.

Tesla, the world's leading electric-car maker, is worth about $827 billion, compared to Daimler's market capitalization of about $76 billion, even though Daimler sells many more vehicles and generates hefty profits.

Investors have argued that Daimler's share price didn't reflect the full value of the separate businesses, which could be unlocked by separating them.

Arnd Ellinghorst, an automotive analyst at Bernstein Research, estimates that the trucks and buses division is worth about EUR35 billion as a stand alone company, a valuation that he said isn't reflected in Daimler's share price today.

"The separation of Trucks and premium cars has been a key topic for us for a long time. We see very little industrial and cultural logic for combining these two very different businesses," Mr. Ellinghorst wrote in a research note.

Daimler rival Volkswagen AG listed its truck business in an initial public offering in 2019, renaming it Traton SE. It now has a market capitalization of about EUR12 billion. Traton has been expanding to challenge Daimler and Volvo AB, the Swedish truck maker, and agreed last year to acquire Navistar International, the U.S. truck maker.

Daimler's trucks and buses business is the largest commercial vehicles manufacturer in the world. It achieves nearly half its revenues in the U.S., where it owns the Freightliner trucks business.

Daimler Trucks and Buses has been pushing into electric and self-driving commercial vehicles, but now faces competition from Tesla and newcomers such as Nikola. The Daimler business reported EUR24 billion in revenue in the first three months of last year, the latest figure available. It sold 244,554 trucks and 13,309 buses during the period.

Philippe Houchois, an automotive analyst with Jeffries, welcomed the spinoff, saying that while falling short of a full separation of the company "the proposed deal is significantly more attractive than a partial IPO."

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

 

(END) Dow Jones Newswires

February 03, 2021 13:00 ET (18:00 GMT)

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