TRATON Group parent Volkswagen AG is willing to pay more than the $700 million sweetener in its latest $43-a-share offer for Navistar International Corp. (NYSE: NAV).
“Navistar’s board of directors and management team are committed to exploring all avenues to maximize value,” Navistar said in a statement Thursday acknowledging the new offer. TRATON offered $2.9 billion, or $35 a share, Jan. 30 for the 83% of Navistar it does not already own.
It appears unlikely the revised offer is enough for Navistar to let TRATON inspect its books. TRATON is the holding company for VW’s truck brands
“[There is] no assurance that any transaction with TRATON will occur or be consummated,” Navistar said.
JPMorgan and PJT Partners are Navistar’s financial advisers. Sullivan & Cromwell LLP is its legal counsel. Troy Clarke is quarterbacking the Navistar side as executive chairman. Clarke retired as chairman, CEO and president July 1,
TRATON’s portal to North American market
TRATON sees Navistar as its portal to the North American market, where rivals Daimler Trucks and Volvo AB are well established. That goal is unchanged, though achieving it is getting more expensive.
TRATON made its latest offer public because talks broke down with Navistar’s board, which wants $50 a share to start diligence, the New York Post reported Friday.
“We continue to believe in the compelling strategic benefits that a complete merger of TRATON and Navistar would produce,” TRATON CEO Matthias Gründler said in a statement Thursday. “This is why we are reemphasizing our interest in the transaction in spite of the COVID-19 pandemic.”
Navistar and TRATON have an alliance in powertrains and purchasing. It is worth $5 billion over five years.
Volkswagen AG intends “to provide funds for the financing of an increased offer,” Helen Beckermann, head of Volkswagen Group investor relations, said in a statement Thursday.
Higher and higher
A Monday article in the Post said that Navistar’s third-largest shareholder, investment fund manager Mark Rachesky, wanted more than $70 a share. Rachesky’s MHR Holdings declined comment on the specifics of what Rachesky sought.
“Any speculation on MHR setting a price is reckless and completely false and only serves to create unnecessary distraction and strife,” a Rachesky spokesman told the newspaper.
Navistar’s largest shareholder is philanthropist Carl Icahn. He has made no public comment on how much he thinks Navistar is worth. Icahn owns 17% of Navistar. TRATON owns 16.8% and Rachesky owns 16.3%.
Longtime Jeffries analyst Steven Volkmann raised his target price for Navistar to $45 a share from $35 a share on Wednesday. Shares could slide to $27-$30 a share if no deal is announced in the coming weeks, he said. Navistar shares closed Friday at $41.55.
What’s in it for Navistar?
Navistar executives remained mum about the bid on the company’s third-quarter analyst call on Tuesday. Gabelli Funds analyst Brain Sponheimer asked what upside Navistar would gain by being owned by a larger company. He didn’t get a direct answer.
“Our job as the management team is to continue to put points on the board,” Chief Financial Officer Walter Borst said. “And I think you were paying attention. You referenced a variety of things we are working on.”
Those include the Navistar 4.0 strategy comprising manufacturing and supplier efficiencies. One is a 2024 goal for a 12% margin of earnings before interest, taxes, depreciation and amortization (EBITDA). Another is a 25% share in Class 8 and medium-duty trucks and school buses.
Few immediate changes
Given the close cooperation between Navistar and TRATON through its alliance, a TRATON takeover could result in few immediate changes.
For example, Navistar in August renewed a contract with engine-builder Cummins Inc. (NYSE: CMI). Meanwhile, Navistar and TRATON work together on Navistar’s International A26 12.4-liter engine.
“Navistar has been a great partner with us for over 80 years,” Cummins investor relations director James Hopkins said during a Cowen investor conference on Thursday. Navistar buys a variety of products from Cummins. That includes the majority of its medium-duty engines.
“[We] also have a good relationship with TRATON,” Hopkins said. It has a joint venture with Sweden’s Scania. Cummins sells engines to both Scania and MAN.
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