Traton has announced it has agreed to raise its takeover bid for Navistar International to $US44.50 per share up from its earlier bid of $US43, and indicated it may be closing in on the protracted deal that would enable it to complete the acquisition of Navistar and extend its reach into the vital North America truck market.
A successful completion of the bid to acquire all of Navistar would see a global truck business that would combine Traton’s MAN, Scania and Volkswagen truck brands with Navistar, completing the final piece in the jigsaw for an operation that was originally mastermined by Andreas Renschler, who left the company as CEO in July.
The plan mimics Renschler’s strategy when he previously headed up Daimler trucks, where he engineered the acquisition of Freightliner, Western Star and Detroit Diesel in the US and Fuso in Japan to combine with the Mercedes Benz, creating a global reach for that corporation.
Despite Renschler’s departure, his successor, Herbert Diess, is clearly pushing on with the acquisition plan, despite the roadblocks imposed by some hard bargaining major shareholders in Navistar, who have been holding out for a higher offer.
Diess, like his successor and mentor Renschler, knows that without a North American presence Traton cannot be considered a truly global truck brand. Success in adding Navistar to the Traton group is vital at a time when the truck industry is seeking ways to share the costs of developing low and zero emissions transport technology.
The North American market is still the truck industry’s largest source of profits, and without a presence there Traton cannot take on rivals Daimler, Volvo and Paccar, all of which have strong and profitable presence in both Europe and North America along with other key markets including Latin America and Asia.
Raising its bid for Navistar to $US44.50 per share will mean that Traton would pay around $US3.7 billion ($AUD5.22billion) for the remaining shares it doesn’t own, valuing the U.S. business at around $US4.4 billion ($AUD6.2 billion).
Traton currently owns 16.8 per cent of Navistar making it the equal biggest shareholder in the US company, which has struggled in recent times to muster the finanbce and resources to stay competitive with its major US rivals including Freighliner, Volvo, Mack and the Paccar brands Peterbilt and Kenworth.
In reality Navistar also needs Traton and its extensive financial and technical resources to stay viable and competitive. There are no obvious alternative suitors for Navistar apart from Traton and without a major injection of capital and technology Navistar would have been headed for corporate oblivion in time.
In a statement to the markets on Friday US time, Traton announced its increased offer for the remaining 83.2 percent of the Navistar shares, and said that it had ‘reached agreement in principle to acquire those shares’.
“Navistar and Traton SE have reached agreement in principle to acquire by merger all shares in Navistar not already held by Traton, at a price of $US44.50 per Navistar share,” Traton said in the statement.
“The deal hinges on finalising due diligence, agreeing to merger terms and related transaction documents and approval by the executive bodies of Navistar and Volkswagen, the Traton statement said.
“There is no assurance that the parties will reach agreement on definitive transaction documentation, or as to the terms thereof or that any transaction, if such agreement is reached, will ultimately be consummated,” the statement cautioned.
The higher $US44.50 per share offer came just hours before Traton’s earlier $US43 per share offer was due to expire, and followed days of protracted negotiation during which Navistar’s board insisted the offer would need to be raised to $US44.50 per share to win the backing of existing shareholders.
On the back if the announcement Navistar shares closed up 22.9 per cent at $US43.52 o Friday.
The main stumbling block for Traton has so far been winning over billionaire activist investor, Carl Icahn, whose fund also holds a 16.8 per cent stake in Navistar.
Icahn, his former protégé Mark Rachesky’s MHR Fund Management and Gabelli Funds, together hold about 40 per cent of Navistar and have been forcing Traton’s hand to the point that many believe their brinksmanship may have forced Renschler’s departure.
In a recent address to shareholders at its AGM, new Traton CEO, Herbert Diess, said that boosting the value of VW’s trucks unit is his major priority.
Traton is in the midst of a major restructuring of MAN unit and Diess also singled out the importance of acquiring Navistar as a vital goal in his address to the AGM.
It seems as though the new offer will seal the deal for Traton, but the machinations that have played out so far in this intriguing corporate battle means that anything could be possible before this deal is sealed.