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Navistar Gets $3.6B Buyout Offer From Traton, Shares Pop

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Navistar International’s  merger talks with Volkswagen’s (VWAGY - Free Report) trucks arm Traton SE are gathering steam. Notably, Traton already owns around 17% stake in Navistar. Traton has boosted its takeover bid for the rest of the Illinois-based truck maker to $43 per share from $35 offered in January 2020. The revised offer values the portion of the stock that is not already owned by Traton at around $3.6 billion. Post the announcement of the sweetened offer by Traton, Navistar’s shares rallied around 13.8% yesterday to close the session at $40.78. 

Navistar-Traton merger talks had been heating up since January 2020 until the coronavirus outbreak put the deal into jeopardy. However, Volkswagen’s arm has resumed negotiations lately to acquire the rest of Navistar. The acquisition would enable Volkswagen to secure a strong position in the U.S. heavy-truck market — the largest market for the truck industry — and position it better than European peers including Daimler AG and Volvo Group.

While Navistar’s board of directors and management team are currently evaluating the revised proposal of Traton, it wouldn’t come as a surprise if the latter hikes the bid again if the current offer goes unaccepted. Considering Volkswagen limited exposure in the North American truck industry and Navistar’s strong footing in the region along with impressive dealership networks, it would make sense for the Germany-based auto giant to make every effort to purchase the remaining shares of Navistar and become its sole owner. 

Notably, Navistar and Traton have been collaborating over the past couple of years to make developments in the electric vehicle technology in order to slash annual costs of both the companies by $200 million.Navistar is marching toward an electrified future aided by the company’s Next eMobility Solutions, in view of the target of launching medium-duty electric trucks by 2022.

Navistar currently carries a Zacks Rank #2 (Buy). Another top-ranked player in the auto space is the U.S. car giant General Motors (GM - Free Report) , which sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

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