VW Closes on 16.6% Stake in Navistar, Forms Close Alliance

Navistar International Corporation (NYSE: NAV) has  announced the closing of its wide-ranging strategic alliance with Volkswagen Truck & Bus, which includes an equity investment in Navistar by Volkswagen Truck & Bus and framework agreements for a procurement joint venture and strategic technology and supply collaboration.

Now, Volkswagen Truck & Bus has acquired approximately 16.2 million newly issued shares in Navistar, representing 16.6% of post-transaction undiluted common stock (or 19.9% of pre-transaction outstanding common stock), effective February 28, 2017. As a result, Navistar receives $256 million to be used for general corporate purposes.

As part of the alliance agreement and in line with Volkswagen Truck & Bus’s ownership stake, Mr. Renschler and Matthias Gründler, Chief Financial Officer of Volkswagen Truck & Bus, are joining Navistar’s board of directors.

So what are the first steps?

Global Truck & Bus Procurement LLC, the procurement joint venture created by Navistar and Volkswagen Truck & Bus, will create new opportunities for quality improvement and cost reduction, and will enable both companies to benefit from increased global scope and scale. The joint venture is operating out of Navistar’s headquarters in Lisle, Illinois, and comprises representatives from both companies who will be combining the demand of five brands, including Volkswagen Truck & Bus’s Scania, MAN and Volkswagen Caminhões e Ônibus, in addition to Navistar’s own International® and IC Bus™ brands.

The companies’ ongoing technology and supply collaboration, which operates out of Stockholm, Sweden, has set as its goal to facilitate collaboration on several aspects of commercial vehicle development, including advanced powertrain technology solutions. Ultimately, it is expected to optimize research and development spend and expand the technology options both companies will be able to offer customers.

As previously announced, Navistar expects the alliance to be accretive beginning in the first year, and for cumulative synergies for Navistar to ramp up to at least $500 million over the first five years. By year five, it expects the alliance will generate annual synergies of at least $200 million for Navistar. This annual run rate is expected to grow materially thereafter as the companies continue to introduce technologies from the collaboration.

Category: Featured, Management