Volkswagen Signs Off on $3.7 Billion Traton-Navistar Deal

Volkswagen AG’s board signed off on a $3.7 billion deal for its heavy-truck unitTraton SE to acquireNavistar International Corp., deepening the German company’s bet on the lucrative North American market.

VW will provide Traton with a 12- to 18-month loan of 3.3 billion euros ($3.9 billion) to fund the transaction, according to astatement Saturday. Details of the deal — in which Traton will pay $44.50 a share for the 83% of Navistar stock it doesn’t own — were unchanged from an announcementlast month. It’s expected to close mid-2021.

Navistar, the maker of International branded trucks, is a major player in North America. Traton has coveted the company as a means to challenge sector leadersDaimler AG andVolvo AB on a global scale. The VW unit makes Scania and MAN vehicles and is largely dependent on sales in Europe and Latin America.

VW is Navistar’s second-largest shareholder with a 16.7% stake, narrowly behind billionaire investor Carl Icahn’s 16.8% holding. MHR Fund Management, the hedge fund founded by Mark Rachesky, owns almost 16.4% of the Lisle, Illinois-based company.

While analysts have largelypraised the logic of Traton’s purchase, the company has experienced how difficult it can be to integrate industrial operations after taking full control. Cooperation between Scania and MAN has been complicated for years by internal rivalries, and Traton embarked on a deeprestructuring at MAN after cost-sharing projects with Scania failed to stop a dramatic erosion in earnings.

Apart from establishing a U.S. footprint through the Navistar takeover, Traton has been building its presence in Asia. It announced aplan last month to expand an existing purchasing cooperation withToyota Motor Corp.’s truck subsidiary Hino by adding joint work on battery-electric and fuel-cell trucks.

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