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VW Hopes To Raise 1.9 Bln Euros By Floating 10% Of Its Truck Unit


VW Hopes To Raise 1.9 Bln Euros By Floating 10% Of Its Truck Unit
The German auto giant Volkswagen plans to put up for sale 10 per cent shares of its truck unit Traton at the stock exchange and hopes to generate up to 1.9 billion euros ($2.1 billion). Earlier the company had announced its intention of listing of up to a quarter of the business unit.
The public offering would be priced at 27-33 euros per share, said the company in a statement. According to analysts at Jefferies, the price range set for the unit valued the unit Traton at a slight discount to industry peers but at a premium to Swedish competitor Volvo .
The increase in demand for electric vehicles and the need for auto companies to prepare to meet such demand to stay competitive and relevant in the market is pushing them to increase the presence of electrically powered vehicles in their product portfolio. Wolfsburg-based VW is no different. The company plans to invest the cash generated from the listing in transforming its auto production as part of its plan to develop production lines for dozens of electric vehicles in the forthcoming years. The German auto giant has already struck an alliance with United States based Ford Motor Co for this purpose.
VW had earlier shown an interest in U.S.-based truck maker Navistar and hence the company is also hoping to leverage the premium that truck stocks typically have over auto stocks create an acquisition currency. The management of the company has however denied that there is any immediate chance of a Navistar deal. However analysts believe that such a strategy would be a perfect fit for company to make up for its losses in the Chinese market by making up in the US market’s huge trucking industry. China traditionally accounted for sale of almost half of the cars sold by VW.
Earlier reports had indicated that the VW is looking for a stake size that would be on the bottom end of a range of 10 per cent to 20 per cent. The issue size could reach 11.5% of Traton's equity if banks running the deal exercise an over-allotment option. Based on the offer range, the initial public offering values Traton at 13.5 to 16.5 billion euros according to analysts.
However some analysts have warned that there can be dilution of existing shareholdings because there can be issuance of fresh equity duet to Traton's potential acquisitiveness. That brought down shares of the company by 0.5 per cent in early trading in Frankfurt on Friday.
VW had earlier stopped an earlier listing in March as it is apparently being more cautious about the volume of shares it will place for listing. Earlier, the company had planned to list about 25 per cent of truck business unit for listing. This paring down of the volume was blamed on market conditions by the company.
But according to reports, the success of the IPO would determine whether VW decides to list more shares of the truck unit for sale to the public but the company plans to remain the majority shareholder of Traton at least in the mid term.