Traton on Sept. 10 upped the ante in its offer to buy all outstanding shares of common stock of Navistar International Corp. The new offering price of $43 per share in cash is a 23% increase from the $35 per Navistar share that Traton offered at the end of January, according to an announcement from the company. Traton, formerly VW Truck and Bus, currently holds 16.8% of Navistar’s outstanding common shares. 

“We continue to believe in the compelling strategic benefits that a complete merger of Traton and Navistar would produce. This is why we are re-emphasizing our interest in the transaction in spite of the Covid-19 pandemic,” said Matthias Gründler, CEO of the Germany-based commercial vehicle manufacturer, in a press release.

According to MarketWatch, the offer represents a 20% premium over Navistar’s stock closing price of $35.84 on Sept. 9. Navistar Wednesday reported a wider-than-expected third-quarter loss. Its shares jumped 16.5% to a two-year high in morning trading after the announcement.

Traton said in the announcement that it expects the Navistar’s board of directors to review the increased offer. The New York Post reported on Sept. 7 that a squabble on the board could derail the merger, with one member demanding a significantly higher share price than even the sweetened offer.

The offer remains subject to a satisfactory due-diligence process as well as negotiation and a common understanding as regards the merger agreement, and any resulting merger agreement would be subject to final approval by the boards of Traton and Volkswagen AG, and Navistar’s board and stockholders.

Navistar issued a statement confirming receipt of the proposal and said, "Navistar's board of directors and management team are committed to exploring all avenues to maximize value. Consistent with its fiduciary duties, the board will carefully review the revised proposal from Traton in consultation with its advisors to determine the course of action that it believes is in the best interests of the company and its stakeholders." The company warned that "there is no assurance that any transaction with Traton will occur or be consummated. Navistar does not intend to make any additional comments regarding the proposal unless and until it is appropriate to do so, or a formal agreement has been reached."

Traton was formed in 2018 out of Volkswagen’s Truck and Bus Group, in order to spearhead the German automaker's push to become a major player in the global commercial vehicle market. That bid included establishing a presence in North America – the world’s highest volume commercial vehicle market.

To further that goal, Volkswagen had already developed a close relationship with Navistar, in 2016 announcing a strategic alliance that included various research and development projects. That alliance has helped lead to Navistar introducing a version of Volkswagen truck brand MAN’s diesel engine as the International A26 engine for International Class 8 trucks and more recently, a prototype electric medium-duty truck.

UPDATE: On September 14, Navistar's board of directors issued a statement saying that "after careful consideration with the assistance of its financial and legal advisors, has unanimously concluded that while Traton's revised proposal of $43.00 per share significantly undervalues the company and substantial synergies from a combination, it does represent a starting point for further exploring the possibility of a transaction. Traton has developed a strong strategic relationship with the company in recent years, and, in light of the 23% increase in their proposal, the board believes the best way for Traton to appreciate the true value of a potential combination is to allow it to conduct due diligence and engage in further synergy discussions with the company."