A little-known trucking company surges nearly 58% after Volkswagen makes a surprise offer to buy

• US truck manufacturer Navistar’s shares shot up in pre-market trading Friday, after Volkswagen said Thursday it could buy the company in cash.
• Activist investor Carl Icahn is Navistar’s single largest shareholder, and the billionaire has taken an active role in reforming the company over the past several years.
• The truck manufacturing industry struggled in 2019, and Navistar’s stock trailed the S&P 500. It started out the new year on a decline.
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Hardly a household name, truck manufacturer Navistar’s stock rose to sudden popularity Thursday, continuing into Friday’s pre-market trading. Shares surged as much as 57.7% Friday after Volkswagen’s trucking arm, Traton, made an unsolicited offer to buy the company for $US2.9 billion, or $US35 per share, Thursday. Volkswagen, which already owns a 16.76% stake in Navistar, said it would pay entirely in cash. The two companies are some of the biggest in the truck-making industry. But to make the acquisition, Volkswagen will have to get the blessing of activist investor Carl Icahn: The billionaire’s fund owns about 17% of Navistar’s outstanding stock, making Icahn Navistar’s single largest shareholder. The offer comes at a time when the broader trucking manufacturing industry is in a slump, with new orders in decline, The Wall Street Journal previously reported. In its most recent earnings, Navistar’s fourth quarter revenue declined versus the year prior. The stock started the year sliding downwards after it trailed the S&P 500 throughout 2019. Navistar unveiled a new strategic plan, Navistar 4.0, in fall of last year. The plan set a goal of 12% Ebitda margin by 2024 and said the firm would grow market share. It was the latest initiative the company has undertaken in recent years. After Icahn built an 11.9% stake in 2011, he pressured the company to implement a number of reforms, including making changes to management and switching engine suppliers. The company’s sluggish share price set off whispers of acquisition last year, Barron’s previously reported. Navistar confirmed in a statement Tuesday that it received Volkswagen’s offer and said it would “carefully review and evaluate the proposal in the context of Navistar’s strategic plan.”

Shares of Navistar were down about 16% for the year through Thursday’s close at $US24.07 per share.