Faulty ignition

31 January 2020 By Christopher Thompson Follow @CGAThompson

The German automaker’s truck unit has offered $2.9 bln in cash for the 83% of Navistar it doesn’t already own. The premium looks underpowered compared with the benefits of an alliance. But falling volumes leave the U.S. company and shareholder Carl Icahn with few alternatives.

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Volkswagen-owned Traton said on Jan. 30 that it had offered $35 a share in cash, or $2.9 billion, for the shares of U.S. truck maker Navistar International that it does not already own.

Volkswagen has made its interest in buying the remainder of Navistar clear since acquiring an initial 16.6% stake in 2016, which has since grown to nearly 16.8%.

U.S.-listed Navistar shares shot up by 50% to just over $36 a share in after-hours trading following Traton's proposal.

Navistar said it “will carefully review and evaluate” the offer.

Traton said the price represents a 19% premium over Navistar’s 90-day volume-weighted average price of $29.40.

The company will have to win over Navistar's largest shareholder, financier Carl Icahn, whose fund controls 16.9% of Navistar's shares. Icahn and two other activist funds, Mark Rachesky's MHR Fund Management and Gabelli Funds, together own 40% of Navistar's shares, according to Refinitiv data.

Traton shares rose 0.7% to 23.17 euros by 0900 GMT on Jan. 31.

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