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Traton to Obtain Navistar for $3.7 Billion

We did not want to write about this Traton-Navistar deal as it was in progress, but it appears that the negotiations have been finalized. Traton, subsidiary of the Volkswagen Group, is absorbing Navistar in its entirety.

Details

Before the buyout agreement, Traton owned 16.7% of all common shares in Navistar, meaning that their purchase was not a total buyout in the typical sense, but simply the remaining 83.3% of the company.

The timeline of the negotiations takes place over almost an entire year (see below), but the gist of the transaction is that the share price agreed upon by both Traton and Navistar’s board of directors is $44.50 per share, totaling to a purchase of $3.7 billion. Traton being worth approximately $97 billion at the time of the writing of this article, it is a small but not insignificant portion of the company’s total worth.

“[This] announcement accelerates our Global Champion Strategy by expanding our reach across key truck markets worldwide, including scale and capabilities to deliver cutting-edge products, technologies, and services to our customers,” Traton CEO Matthias Gründler said in a statement. “Together, we will have an enhanced ability to meet the demands of new regulations and rapidly developing technologies in connectivity, propulsion, and autonomous driving for customers around the world.”

Timeline

Instead of writing an article every time some new information comes to light, here is a timeline of everything that has happened so far between Traton and Navistar.

  • September 2016: Traton purchases 16.7% of Navistar’s common stock shares. Price per share was approximately $22.50.
  • January 30th, 2020: Traton reaches out and offers to purchase the rest of the company for $35 per share. Before the announcement, the stock price was roughly $25 per share, meaning Traton was offering a 40% goodwill premium to make the deal more lucrative to Navistar shareholders.
  • March 25th, 2020: Coronavirus hysteria causes Navistar’s stock to reach its 2020 end-of-day low, $15.30. At $35 per share, Traton would be paying more than double the market rate for shares.
  • September 10th, 2020: With the stock having recovered from COVID-19 woes, the stock hits $35.84. Knowing this is lower than the initial offer, Traton offers $43 per share. Navistar shares shoot up to $41.56 per share on the good news.
  • October 14th, 2020: Tired of playing games, Navistar gives Traton an ultimatum: agree to buy the shares by October 16th, two days, or the deal is off. Navistar shares plummet to $36 per share on fears of the deal falling through.
  • October 15th, 2020: both companies reach a hasty agreement of $44.50 per share, finalizing the purchase price. Stock rallies back to around $43.36.
  • Today: both companies announce the acquisition will officially happen some time in mid-2021, but the contract has been signed.

Conclusion

With trucking companies partnering with each other constantly throughout 2020, including ones where both companies take an active financial stake in one another, it is hardly a surprise that a complete buyout would occur.

It seems as though the trucking manufacturing industry is consolidating. As companies buy each other to enter new markets, is it possible we might one day reach a point of only one, mega-truck builder? It is unlikely, but sometime in 2021, the total number of truck manufacturers will be one fewer.

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