VW debut of truck maker to test the firm’s overhaul plan


Sat, Jun 15, 2019 - Page 10

Volkswagen AG valued its heavy-trucks business at as much as US$18.6 billion in a planned initial public offering (IPO) that will test VW chief executive officer Herbert Diess’ ambition of overhauling the automaker.

The manufacturer intends to offer stock in Traton SE, which sells MAN and Scania AB vehicles, for between 27 euros and 33 euros per share, it said in a statement on Thursday, valuing the division at 13.5 billion euros to 16.5 billion euros (US$15.2 billion to US$18.6 billion).

It is set to be one of the year’s largest European public offerings.

While trade jitters and a slowing global economy have weighed on recent IPO deals, industrial companies like Switzerland’s Stadler Rail AG and Germany’s Knorr-Bremse AG, which listed in October last year, have fared well.

Listing Traton is management’s highest-profile and most notable move in a push to make the world’s largest automobile manufacturer more agile, which includes potential plans to shed assets, seek cooperation and free up units to make decisions.

Diess is considering selling operations that build ship engines and large transmissions while teaming up with Ford Motor Co on vans and likely electric and autonomous vehicles.

While seeking to allocate investments more efficiently, the moves are also aimed at increasing the company’s stock price and giving VW more financial flexibility. The company has committed to spending 44 billion euros through 2023 on electric and connected vehicles, with the payoff likely years away, leaving the company’s valuation to trail the broader market.

VW’s plans for Traton and with Ford would help create “currency” for the upcoming phase of industry consolidation, Diess told a gathering of top executives.

In the truck division alone, VW plans to challenge industry leaders Daimler AG and Volvo Group in markets such as North America and China. This might include potentially boosting its 16.8 percent stake in US peer Navistar International Corp.

“This IPO represents a much needed first step structural change at VW as the management team seeks to unlock value during a period of significant and transformational industry changes,” Evercore ISI analyst Arndt Ellinghorst said in a note.

Volkswagen shares trade at 6.2 times earnings, compared with an average multiple of 16.1 for Germany’s Dax companies. The company declined 0.6 percent to 141.94 euros at 9:49am in Frankfurt trading, paring gains this year to 2.2 percent.

Global stocks have struggled in recent weeks as trade frictions jeopardize global economic growth.