Navistar International Corp. announced the closing of its "wide-ranging strategic alliance" with Volkswagen Truck & Bus, which includes an equity investment in Navistar, a procurement joint venture, and technology and supply collaboration.
"This alliance with Volkswagen Truck & Bus marks a significant milestone in our company's history, and we expect it will create multiple benefits for both companies in both the near and long term," said Troy Clarke, Navistar chairman, president and CEO. "Now that the transaction has closed, we will move quickly to collaborate with an industry-leading, strategic partner to increase our global scale, strengthen our competitiveness, and provide our customers with expanded access to cutting-edge products, technology and services."
In fact, evidence of the new collaboration was already evident this week with Navistar's announcement at the ATA Technology & Maintenance Council annual meeting of the new A26 engine, based on the crankcase of a D26 engine from MAN – a German truck and engine manufacturer wholly owned by Volkswagen.
"The authorities have given our strategic alliance with Navistar the green light. Our newly-founded purchasing cooperation will begin work immediately. This puts both partners in a stronger position for the future. The strategic alliance provides Volkswagen Truck & Bus with access to the all-important North American market. This is a major step toward becoming a global champion," said Andreas Renschler, CEO of Volkswagen Truck & Bus.
With the closing of the alliance, Volkswagen Truck & Bus acquired approximately 16.2 million newly issued shares in Navistar, representing 16.6% of post-transaction undiluted common stock (or 19.9% of pre-transaction outstanding common stock), effective Feb. 28. As a result, Navistar receives $256 million to be used for general corporate purposes.
Renschler and Matthias Gründler, Chief Financial Officer of Volkswagen Truck & Bus, are joining Navistar's board of directors.
The companies' ongoing technology and supply collaboration, which operates out of Stockholm, Sweden, is intended to facilitate collaboration on several aspects of commercial vehicle development, including advanced powertrain technology solutions.
Global Truck & Bus Procurement LLC, the procurement joint venture created by Navistar and Volkswagen Truck & Bus, will start work effective immediately. Operating out of Navistar's headquarters in Lisle, Illinois, it's made up of representatives from both companies who will be combining the demand of five brands, including Volkswagen Truck & Bus's Scania, MAN and Volkswagen Caminhões e Ônibus, in addition to Navistar's own International and IC Bus brands.
Navistar continues to expect significant synergies from both the strategic technology collaboration and the procurement joint venture, expecting at least $500 million in "cumulative synergies" over the first five years.