Report: Volvo considering Navistar bid

STOCKHOLM, Sweden (Feb. 15) — Volvo AB is talking to Navistar International Corp. about a possible takeover, the Financial Times reported today.

The report, which quoted an unnamed source close to the discussions, speculated that the deal could be worth at least $3 billion US if Volvo acquired all of Navistar’s truck, engine, and other operations.

Chicago-based Navistar International is the world’s fourth-largest producer of heavy and medium trucks and school buses. Volvo is No. 2. Aside from class-8 trucks in North America, the two companies have little overlap with one another.

Given Navistar’s market value of $2.3 billion, based on Friday’s closing stock price of $35.25 on the New York Stock Exchange, the Financial Times speculated that any purchaser would probably have to pay at least $3 billion for full control.

Volvo declined to comment on the report. A company spokesperson told Reuters that Volvo “has shown that by taking a stake in Scania, we’re ready to participate in the restructuring of the industry but I’m not ready to give any details in this specific (Navistar) case.”

Volvo bought 13% of its Swedish rival in January, and is pursuing 100% interest, and recently agreed to sell its automobile division to Ford Motor Co. so it can concentrate on building heavy trucks.

Speculation that Volvo might want to buy Navistar heated up one week ago, prompting an 8% rise in share value last Monday alone. The stock has climbed about 11% in the past 12 months driven in large part by demand for trucks.

Last week Navistar reported fiscal first-quarter earnings (ended Jan. 31) that rose a higher-than-expected 61%, and showed a net income of 91 cents US per diluted share — double its year-ago profit of 42 cents. Sales rose 11% to $1.92 billion from $1.73 billion.

Navistar boosted its worldwide shipments of medium and heavy trucks and school buses about 2% to 29,900 from 29,300 as international demand outpaced its capacity. The company estimates its class-8 market share at 25.1%, down from about 29% a year ago.

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