Volkswagen’s (U.S. OTC: VLKAF) initial public offering of its heavy-truck unit TRATON SE has come to fruition, albeit at the low-end of the anticipated price range.
Before the offer period began, Volkswagen’s management team seemed confident that the 10 percent offering of its truck division would garner between 27 to 33 euros per share. As the offer period closed, investors were guided to an initial opening price of 27 euros.
TRATON’s shares began trading on June 28, 2019 on the Frankfurt Stock Exchange and Nasdaq Stockholm under the ticker 8TRA. The shares opened at the 27 euro level, but immediately fell below that price.
The stock price values TRATON at 13.5 billion euros, well-below the high-end of the valuation range that topped out at 16.5 billion euros. The 10 to 11.5 percent outstanding float, shares eligible for trade in the public market without restriction, comes from existing shares that had been held by Volkswagen. The sale of these shares results in 1.55 billion euros in capital for Volkswagen, lower than the high-end expectation of “1.9 billion euros” management had hoped to raise. Volkswagen intends to retain a majority stake in TRATON following the IPO.
As part of its restructuring, Volkswagen is reassessing various assets. The TRATON spinoff allows the company to potentially increase the valuation multiple on its truck unit and generate capital to pursue other long-term initiatives like electric vehicles. Volkswagen is also looking to sell non-core assets like its energy solutions group and its transmission division.
Volkswagen owns 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.
Formerly Volkswagen Truck & Bus AG, TRATON includes the MAN, Scania and Volkswagen truck brands. TRATON reported revenue of 25.9 billion euros in 2018 with truck sales of 233,000 units and is viewed as the market leader in its core markets of Europe and South America. TRATON has roughly 81,000 employees and 29 production and assembly facilities in 17 countries.
Chairman of the Supervisory Boards of Volkswagen and TRATON Hans Dieter Pötsch said, “The successful IPO demonstrates the investors’ trust in TRATON’s future. It confirms that TRATON and Volkswagen are on the right track and that they are pursuing the right strategies. The IPO will provide a basis for both companies to create additional value for all their stakeholders going forward.”
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