VW Truck & Bus aims capital market access

Capital-market preparations will take 12 months, and MAN Diesel & Turbo engines unit to be shifted to parent firm

by BLOOMBERG

MUNICH • Volkswagen AG (VW) is speeding up preparations for its heavy commercial-vehicle division to sell stock or debt on its own as the unit expands to compete with global leaders Daimler AG and Volvo AB.

As part of that push, the VW Truck & Bus business is cutting costs across its MAN SE, Scania AB and Brazilian VW commercial-vehicle operations through joint procurement and development of parts, the company said yesterday in a statement. Capital-market preparations will take 12 months, and the MAN Diesel & Turbo engines unit will be shifted to the parent company.

“This comprehensive project will accelerate the transformation of our company” into “a true global champion, and will quickly make it ready for the capital markets”, division head Andreas Renschler (picture) said at a press conference in Munich. He reiterated that no decision has been made on an initial public offering (IPO) yet.

A stock sale by the heavy-vehicle division, which Evercore ISI estimates has as much as €30 billion (RM143.74 billion) in assets, would mark the most significant structural shift so far for VW as the world’s biggest carmaker retools for massive change across its industry. The German manufacturer appointed Herbert Diess, head of its namesake auto brand, as its new CEO last week, and he pledged to accelerate decision-making across the group to adapt to rapid shifts in technology and competition.

An IPO for the truck and bus unit “is just one of the options” the division is considering to gain financing, Renschler said in an interview, adding that another would be to sell only bonds. “It’s ultimately a decision for our shareholders.”

VW chairman Hans Dieter Poetsch told reporters last Friday the auto manufacturer will retain a controlling stake in the commercial-vehicle business and that a share sale might not happen until 2019, as it still requires final approval.

Compared to Daimler, which owns the Freightliner truck brand, or Volvo, which builds Mack models, the VW division has only recently gained a foothold in North America, with the purchase two years ago of a 17% stake in US peer Navistar International Corp.

Changing VW Truck & Bus’ legal status from a limited-liability company into a jointstock corporation will help the unit avoid “wasting time once we have a decision by our shareholders”, Renschler said.

VW shares were down 1% at €175.48 as of 12:26pm yesterday in Frankfurt trading in the first drop in a week. That pared the stock’s gain this year to 5.4%.

An IPO of VW Truck & Bus would mark the next major corporate transaction in Germany after Siemens Healthineers AG raised €4.2 billion in the country’s second-biggest offering in almost two decades.

Renschler joined VW in 2015 after almost a decade of running Daimler’s truck unit, the world’s biggest commercial-vehicle manufacturer by revenue. He set about breaking down resistance to cooperation among Scania, MAN and the Brazilian business.

That strategy has included expanding the unit’s global presence. The division boosted both deliveries and revenue last year by 12%, while operating profit excluding special items surged 27%.

The unit signed a cooperation agreement with Toyota Motor Corp’s Hino division last week, and Renschler said the German company is “very satisfied with the development at Navistar”. He’s now looking to increase VW Truck & Bus’ sales in China and other markets.

VW’s second-largest shareholder, the German state of Lower Saxony, has voiced its support for a deal, with local Economy Minister Bernd Althusmann — who represents the state on VW’s supervisory board — saying he is “confident the stock listing will be successful”.

With Daimler rumoured to be preparing its trucks unit for an IPO, VW may first have to address a pending legal dispute with minority shareholders at the MAN subsidiary if it wants to beat Renschler’s previous employer to a share sale.

Beyond vehicles, Renschler plans to generate extra revenue by selling more engines to other customers, such as agriculture-equipment makers.

“The off-highway business is very important for us as it enables us to sell commercial vehicle engines with very few changes to our partners,” Renschler said.