Volkswagen to proceed with IPO despite choppy markets

Formerly Volkswagen Truck & Bus AG, TRATON includes the MAN, Scania and Volkswagen truck brands. The group of brands was consolidated in 2015 to form TRATON with the mission of creating a “global champion in the transportation industry in terms of profitability, global presence and innovation,” according to the press release. TRATON has roughly 81,000 employees and 29 production and assembly facilities in 17 countries.

TRATON reported revenue of 25.9 billion euros in 2018 with a 13 percent increase in adjusted operating profit to 1.65 billion euros. The company is the market leader in its core markets of Europe and South America and recorded total truck sales of 233,000 units in 2018.

Initially, the share offering for TRATON was expected to be as high as 25 percent with a total company valuation of approximately 25 billion euros. However, recent reports from Reuters citing sources close to the deal indicate that the shares sold would likely represent 10 to 15 percent of the total entity at a valuation of 2 billion euros.

The IPO is part of Volkswagen’s overall corporate transformation. As announced at its annual general meeting on May 14, 2019, the company wants to restructure assets to unlock incremental shareholder value. In addition to rekindling IPO plans at the meeting, management also spoke of shopping other companies under the Volkswagen umbrella, specifically mentioning MAN Energy Solutions, a manufacturer of large-bore diesel engines for marine and stationary applications, and Renk AG, a transmissions and gear manufacturing company.

Volkswagen, through its wholly owned TRATON subsidiary, owns approximately 16.6 million shares, or 16.8 percent of Navistar (NYSE: NAV), a medium- and heavy-duty truck manufacturer. The alliance between the two companies provides joint collaboration on engine technology, the sale of engines and contract manufacturing. Volkswagen has been rumored to have an interest in acquiring NAV, but management has walked back those comments in recent weeks.

In an interview with Bloomberg TV after the annual meeting, TRATON’s Chief Executive Officer Andreas Renschler said, “The most important point for us is that we’ve made the decision to IPO now.” According to Yahoo Finance, “He said [Volkswagen] is happy with the Navistar partnership and doesn’t have any current plans to raise its 17 percent stake.”

“The IPO is an important milestone for TRATON. The IPO will lay the foundation for TRATON’s further growth by providing us with enhanced entrepreneurial flexibility and access to capital markets. We have one very clear goal for TRATON: creating a Global Champion in the transportation industry”, said Renschler.