The World’s biggest truck maker, Daimler will become a stand-alone independent company following the announcement by the Daimler AG board overnight, that it has decided to split the truck maker away from the car and van company, with the two new entities to have different identities.
The car and van business will be known as Mercedes Benz cars and vans while the truck and bus business will be called Daimler Trucks.
Daimler made the announcement in Germany saying that it will make “major changes in its structure”, which it adds are “designed to unlock the full potential of its businesses in a zero-emissions, software-driven future”.
The Daimler Boards announced that they have agreed to look at a spin-off of its Truck and Bus business and to commence preparations for a separate listing of Daimler Truck.
The statement from Daimler is not a surprise and has been signaled by the specialist business press including Bloomberg in recent weeks.
The Board says it intends a “significant majority stake” in Daimler Truck will be distributed to Daimler shareholders, and that the Daimler Truck business will have a fully independent management, stand-alone corporate governance, an independent chairman, and will qualify for listing on the German DAX.
The transaction and the listing of Daimler Truck on the Frankfurt stock exchange is expected to be complete before the end of 2021.
At the same time the board announced that it is Daimler’s intention to rename itself as Mercedes-Benz at “the appropriate time”.
The board says this will result in a “simplification of the Daimler structure into two strong and independent companies”.
“This is an historic moment for Daimler. It represents the start of a profound reshaping of the company. Mercedes-Benz Cars and Vans and Daimler Trucks and Buses are different businesses with specific customer groups, technology paths and capital needs,” the statement said chairman of the board of management of Daimler and Mercedes-Benz Ola Källenius.
“Mercedes-Benz is the world’s most valuable luxury car brand, offering the most desirable cars to discerning customers. Daimler Truck supplies industry leading transportation solutions and services to customers.
“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, equipped with strong net liquidity and free from the constraints of a conglomerate structure,” Källenius said.
“We have confidence in the financial and operational strength of our two vehicle divisions. And we are convinced that independent management and governance will allow them to operate even faster, invest more ambitiously, target growth and cooperation, and thus be significantly more agile and competitive,” added Källenius.
The current Daimler Truck chairman, Martin Daum said that the company intends to generate value for its shareholders by accelerating the execution of its strategic plans, raising its profitability and driving forward with its development of emissions-free technologies for trucks and buses.
“This is a pivotal moment for Daimler Truck. With independence comes greater opportunity, greater visibility and transparency,’ said Martin Daum.
“We will grow further and continue our leadership in alternative powertrains and automation. We have already defined the future of our business with battery-electric and fuel-cell trucks, as well as strong positions in autonomous driving.
“With targeted partnerships we will accelerate the development of key technologies to bring best-in-class products to our customers rapidly,” Daum added.
“Daimler Truck already has a solid financial basis, and our business model is robust. We will continue to work on our cash flow management and we know how to deal with industry market cycles – we have proven that again in the significant COVID-related global market reduction,” he said.
“We have clear strategies to raise our financial performance and accelerate our execution. We will use our strong and well-known global brands, our scale and our exceptional technology to deliver industry-leading returns,” the chairman added.
As the World’s largest truck and bus company Daimler generated revenue of $AUD70.8 billion (€44.9billion) in 2019 producing a bit over 488,000 trucks and buses, with the majority or $AUD40.2 billion revenue ( €40.2billion) coming from trucks and $AUD7.41billion (€4.7billion) from bus.
The news that Daimler intends to float Daimler Truck as an IPO, comes almost two year after Volkswagen floated its truck arm Traton.
Chairman of the supervisory board of Daimler, Manfred Bischoff, sees the planned market listing as an important step to create value.
“Mercedes-Benz and Daimler Truck enter this transformation with significant strengths and we are convinced they will emerge even stronger as independent companies, serving their respective customers,” said Bischoff.
“With their different return profiles and capital needs, the rationale for two independent entities is evident. We are convinced that the capital markets will appreciate the opportunity to invest in more clearly focused, pure-play businesses,” he said.
“The final decision on the spin-off has to be made by an extra-ordinary shareholder meeting of Daimler, which is planned to take place in Q3 2021.“
The deal has the approval of Daimler’s important General Works Council, a major part of large German corporations that gives employees a say at board level.
The intended structure of the transaction would involve Daimler transferring the majority of Daimler Truck to its shareholders on a pro rata basis in accordance with existing shareholdings, but it intends to retain a minority shareholding.
The statement says that all further details of the spin-off will be presented to the shareholders at an extra-ordinary shareholder meeting scheduled for Q3 2021, where it intends to obtain the mandatory approval to the plan.
The offering is likely to see one of the largest German share sales ever and would build on Daimler’s adoption of the new corporate structure giving more independence to its main divisions.
Investors have urged Daimler for a number of years to go a step further and consider a separate listing of the trucks operation.
Daimler shares rose 2.8 per cent up to $AUD96 (€60.92) shortly after the start of regular trading in Frankfurt on Wednesday following a rise of around 17per cent across 2020.
Analysts say that Daimler’s truck unit could be valued at about $AUD45 billion (€29 billion).
Despite the challenges of Covid the listing may come at a good time given reports that truck orders and profits are on the rise globally.
Volvo this week reported surging orders along with a better than expected quarterly profit and added that transport and construction activity has fully recovered in most markets, improving customer confidence.
The Swedish company also boosted its forecast for Europe and North America’s heavy-duty vehicle sales this year by a combined 90,000 units.
However the counter to this optimism is that Volkswagen’s Traton IPO in 2019 raised around $AUD2.8billion (€1.8 billion ) for 11.5 per cent of the business, which valued Traton in total at around $AUD24 billion (€15.2 billion) at the time . A bit over 18 months later Traton ‘s market capitalisation is now down to $AUD18.2 billion (€11.5 billion) .
Traton sealed a deal late last year to acquire US truck maker Navistar for around $AUD 4.84 billion, in a move to give Traton a footing to challenge Daimler and Volvo in North America, which is the truck industry’s biggest source of profits globally.
It is clear the gathering of the three major European truck makers in an increasingly tough battle for global truck market dominance has only just begun and Daimler’s latest moves promise to spice up the fight.