WOLFSBURG, Germany: Volkswagen will place a stake of less than 25% in truck unit Traton in a listing planned before the end of June, a person familiar with the matter said on Tuesday.
Volkswagen is being more cautious about the volume of shares it intends to place after halting earlier listing plans in March, when it had planned to place a stake of up to 25% on the stock market.
“We are not thinking about the upper end of the corridor given the market environment,” said the person, speaking on condition of anonymity due to the sensitivity of the matter.
Volkswagen, which announced its intention to float Traton on Monday night, will list between 10% and 20% of the truckmacker’s shares in Frankfurt and Stockholm. It will use the next two weeks to gauge investor appetite, the person said, adding that a larger offering was still possible.
The Wolfsburg-based company will invest the proceeds from the initial public offering (IPO) into its passenger car business, the person added.
Because truckmakers trade at higher multiples than passenger car companies, separately listed Traton shares will serve as a more valuable currency in merger and acquisition deals than using existing VW shares, the person said.
VW has made no decision on whether to pursue an acquisition of United States based rival Navistar, the person said.
“The Traton IPO is a standalone deal which is not directly linked to subsequent deals. Any additional steps need to be evaluated subsequently,” the person said.
“We need the liquidity from Traton to fund the transformation of the automotive business,” the person said, adding that mass-producing electric cars is a challenge no carmaker has yet mastered.
More shares could be placed on the market in subsequent transactions if the IPO is successful, the person said, adding that VW will remain Traton’s majority shareholder for the foreseeable future.
Asked whether Volkswagen could play an active role in auto sector mergers and acquisitions, the source said that VW had the ability to review opportunities should they arise.
“We are not lacking scale, we are not lacking in the area of technologies, and we are not lacking complexity. We need to work on delivering our strategy which aims to cut fixed costs.”