Navistar Receives $2.9B Buyout Offer From Volkswagen Arm

Navistar International Corporation (NYSE:NAV) recently announced that it has received an unsolicited proposal from Volkswagen (DE:VOWG_p) AG’s (OTC:VWAGY) subsidiary, TRATON SE, to buy the rest of Navistar in a $2.9-billion or $35 per share bid to forge a significant share of the U.S. heavy-truck market.

Navistar constructs international brand trucks, school buses, defense vehicles and engines. The offer represents a premium of 45% on Navistar's closing price of $24.07 per share as of Jan 30, 2020, bringing its total value at $3.5 billion. Navistar's stock jumped as much as 53% to $36.79 in after-hours trading on the same day.

The proposal will be carefully reviewed and assessed by Navistar's board and advisers. If Navistar accepts the proposal, Volkswagen will acquire it amid its restructuring initiatives.

In September 2016, Volkswagen bought a 16.6% stake in Navistar, which has since risen to 16.8%, fortifying the company’s foothold in the North American market — the largest market for the truck industry.

Further, Navistar and Traton have been collaborating on purchasing and making developments in technology, in order to slash annual costs for both by $200 million a year.

Shares of Navistar have underperformed the industry it belongs to over the past year. Its shares have depreciated 27.8% as against the industry’s rise of 3%.

For fiscal 2020, Navistar projects industry retail deliveries of Class 6-8 trucks, and buses in the United States and Canada between 335,000 units and 365,000 units, compared with the 435,000 units and 455,000 units mentioned earlier. Further, Class 8 retail deliveries are anticipated in the range of 210,000-240,000 units compared with the previously-projected 295,000-315,000 units.

The company expects revenues of $9.25-$9.75 billion, down from the earlier projection of $11.25-$11.75 billion. Also, adjusted EBITDA projections lie in the range of $700-750 million, suggesting a decline from the prior guidance of $875-$925 million.

Navistar is aimed at marching toward an electrified future aided by the company’s latest business unit, Next eMobility Solutions, particularly targeting the launch of medium-duty electric trucks in 2021.

Zacks Rank & Stocks to Consider

Currently, Navistar carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Auto-Tires-Trucks sector include Gentex Corporation (NASDAQ:GNTX) and SPX Corporation (NYSE:SPXC) , each carrying a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Gentex Corporation has an estimated earnings growth rate of 7.32% for 2020. The company’s shares have appreciated 50.2% in a year’s time.

SPX has an expected earnings growth rate of 8.09% for the current year. The stock has rallied 69.5% in the past year.

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