The rumours of VW's intention to buy a 16.6% stake of an American truck manufacturer Navistar were leaked yesterday, previously claiming the stake to be 19.9%.
German giant car manufacturer is aiming to set its foot into the American truck market by buying a stake in a struggling truck company Navistar (NYSE: NAV). The company will purchase a 16.6% stake for $15.76 per share, reports Bloomberg. In addition to that, VW (XETRA: Volkswagen [VOW3]) will get 2 seats in Navistar's management board.
At the moment, the U.S. truck market is led by Daimler AG (XETRA: Daimler [DAI]), VW's German rival, Volvo and Paccar (NASDAQ: PACCAR [PCAR]). According to Statista, the market share of these brands as compared on July's sales of Class 8 trucks, can be divided as follows. Daimler occupies the biggest chunk of the market with a roughly 43% of the market share, with its Freightliner truck model winning 40% of the market. Paccar comes second with 27.2%, followed by Volvo owning 18.7% of the market. Among these players, Navistar scored the last, demonstrating only 11.2% of the market share.
Therefore, Volkswagen is entering a heavily competitive market without a significant market share provided by Navistar. On top of that, the U.S. market hasn't been that welcoming to VW, with the brand's car sales shrinking even before VW's diesel-emission scandal.
Navistar's CEO Troy Clarke told CNBC that VW's diesel scandal involving the passenger vehicles, did not affect the deal in any way.
“By year five, the alliance [is expected to] generate annual synergies of at least $200m for Navistar,” the company said.
Volkswagen's Truck & Bus business was launched back in 2015 and includes such flagship European truck brands as MAN and Scania.
At the opening of the stock market today, Navistar's stock soared 60% after VW confirmed the rumours about the deal. Over the last 5 years, NAV stock fell 70% as the company has been struggling to win the market. As of writing, NAV stock trades at $21,94.
Navistar is predominantly owned by activist hedge funds such as Icahn Capital, MHR Fund Management and Franklin Resources, reports Financial Times. This is something VW would have to deal with in case the company considers full acquisition of the truck manufacturer in the upcoming years.