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Will Volkswagen's Arm Sweeten its Offer to Buy Navistar?

Zacks Equity Research
·2 mins read

Volkswagen’s VWAGY truck arm, Traton SE might have to hike its takeover bid again to purchase Navistar NAV. Notably, Traton already owns around 17% stake in Navistar. Recently, Traton boosted its offer to buy the rest of the Illinois-based truck maker to $43 per share from $35 offered in January 2020.

After careful evaluation of the offer, Navistar dismissed the revised proposal, citing that the bid is too low. The board concluded that the $43/share offer significantly undervalued the company but was a starting point for exploring a possible transaction.

Navistar-Traton merger talks had been heating up since January 2020 until the coronavirus outbreak put the deal into jeopardy. However, Volkswagen’s arm has resumed negotiations lately to acquire the rest of Navistar. The acquisition would enable Volkswagen to secure a strong position in the U.S. heavy-truck market — the largest market for the truck industry — and position it better than European peers including Daimler AG DDAIF and Volvo Group. 

Considering Volkswagen’s limited exposure in the North American truck industry, and Navistar’s strong footing in the region along with impressive dealership networks, it would make sense for the Germany-based auto giant to make every effort to purchase the remaining shares of Navistar and become its sole owner. 

Notably, Navistar and Traton have been collaborating over the past couple of years to make developments in the electric vehicle technology in order to slash annual costs of both the companies by $200 million. Navistar is marching toward an electrified future aided by the company’s Next eMobility Solutions, in view of the target of launching medium-duty electric trucks by 2022.

Volkswagen currently carries a Zacks Rank #3 (Hold). Some better-ranked players from the same industry include BMW AG BAMXF and PEUGEOT SA, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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Navistar International Corporation (NAV) : Free Stock Analysis Report
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