Navistar Shares Surge After Strategic Alliance With Volkswagen Truck & Bus

Navistar International Corporation

shares surged in the pre-market trading after the company disclosed that it established a wide-ranging strategic alliance with Volkswagen Truck & Bus. As a result, the company would get an investment of $256 million from Volkswagen at $15.76 a share. This would translate into 16.6 percent stake. Aside from the equity participation, the tactical deal included strategic technology and supply collaboration apart from a procurement joint venture. Volkswagen Truck & Bus would get the right to name two directors following its equity participation. Navistar indicated that it sees considerable synergies from both the strategic technology collaboration, as well as, the procurement joint venture. The company expects cumulative synergies of a minimum of $500 million in the first five-year period. At the end of the fifth year, the alliance synergies would be a minimum of $200 million. Volkswagen Truck & Bus CEO, Andreas Renschler, said, "We are now taking the next step on our way to becoming a Global Champion in the commercial vehicles industry. The strategic alliance with Navistar is an important milestone and will be very beneficial for both sides." Navistar expects the alliance to position best-in-class products and services to customers. Following the news, NAV surged $3.93, or 27.93 percent, to $18.00 in the pre-market trading.