Volkswagen Truck & Bus will be picking up a 16.6pc equity stake in US-based commercial vehicles manufacturer Navistar International Corporation for around US $ 256 million (Rs 1696 crore approximately). The closing of the share acquisition is expected to be completed in late 2016 or early 2017.
According to a press release issued by Volkswagen, the two companies will pursue a strategic technology and supply cooperation and establish a procurement joint venture.
Navistar, which has been facing major financial crises in the past is expected to gain not only from this fresh inflow of cash but also benefit from the synergies that arise from the association with the strong German brand Volkswagen. Navistar at one point of time had a collaboration with Mahindra & Mahindra for manufacturing trucks in India but the joint venture was called off after seven years in 2012. Mahindra announced purchase of the Navistar Group’s stake in Mahindra Navistar Automotives Ltd (MNAL) and Mahindra Navistar Engines Pvt Ltd (MNEPL). The deal was worth around Rs 175 crore.
Since then Mahindra Truck and Bus Division is part of the Mahindra & Mahindra company.
Navistar’s reason to exit its Indian JVs was part of its turnaround strategy, which was focused on strengthening its North American core businesses and pursuing near-term initiatives to improve the company’s return on invested capital performance.
Now in this latest deal, Volkswagen Truck & Bus will purchase a 16.6% stake in Navistar for a price per share of $15.76 and an aggregate purchase price of approximately $256 million (or approximately €229 million at current exchange rates). In connection with this investment, Volkswagen Truck & Bus will be represented on Navistar's Board of Directors. In addition, both companies have agreed to collaborate closely, the release from Volkswagen added.
With the completion of this latest transaction, Volkswagen Truck & Bus, which includes the brands MAN, Scania, and Volkswagen Caminhões e Ônibus, will gain access to the key North American market, where it was not previously represented. Andreas Renschler, CEO of Volkswagen Truck & Bus and member of the Board of Management of Volkswagen AG responsible for commercial vehicles, said: "Closer collaboration among our existing brands was a top priority for our commercial vehicles business and we are well on track in this context. We are now taking the next step on our way to becoming a Global Champion in the commercial vehicles industry. The strategic alliance with Navistar is an important milestone and will be very beneficial for both sides."
"We are very pleased to partner with a global leader who shares our view of the world, in an alliance that will deliver multiple benefits and is consistent with our open-integration strategy," said Troy Clarke, President and CEO of Navistar. "Starting in the near term, this alliance will benefit our purchasing operations through global scope and scale. Over the longer term, it is intended to expand the technology options we are able to offer our customers by leveraging the best of both companies and enabling Navistar to deliver enhanced uptime. Volkswagen Truck & Bus's equity investment will strengthen our liquidity position and expand our financial flexibility, while aligning us with a valuable strategic partner," he added.
Matthias Gründler, CFO of Volkswagen Truck & Bus, said: "Our collaboration, especially with regard to the powertrain, will considerably increase our synergy potential. Navistar will be able to profit from excellent powertrain technologies and we, in turn, will benefit from significantly higher volumes. Initiating this strategic alliance now will enable us to implement the requirements of Navistar into our joint component platforms from the get-go."
With the strategic technology and supply cooperation, Volkswagen Truck & Bus will become one of Navistar's most important technology partners. While the partnership will focus on common powertrain systems, it will also enable collaboration in many aspects of future commercial vehicle development.
Additionally, Volkswagen Truck & Bus and Navistar have agreed to establish a procurement joint venture that will pursue joint global sourcing opportunities.
Under the umbrella of Volkswagen Truck & Bus, Andreas Renschler has been heading the process of bundling medium- and heavy-duty trucks and buses of Volkswagen AG into a robust commercial vehicles group. The Company's strategy includes plans to expand into new regions. Within the next decade, Volkswagen Truck & Bus aims to become a worldwide leading commercial vehicles group in terms of profitability, innovations for its customers and global presence, Volkswagen said in its release.
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