NAVISTAR, VOLKSWAGEN TRUCK & BUS CLOSE STRATEGIC ALLIANCE 

Navistar International Corporation has announced the closing of its wide-ranging strategic alliance with Volkswagen Truck & Bus, which includes an equity investment in Navistar by Volkswagen Truck & Bus and framework agreements for a procurement joint venture and strategic technology and supply collaboration. The closing of the alliance follows receipt of all necessary regulatory approvals, finalization of agreements relating to the procurement joint venture and the technology and supply collaboration, and satisfaction of other customary closing conditions.

Volkswagen Truck & Bus acquired approximately 16.2 million newly issued shares in Navistar, representing 16.6% of post-transaction undiluted common stock (or 19.9% of pre-transaction outstanding common stock), effective February 28, 2017. As a result, Navistar receives $256 million to be used for general corporate purposes.

“This alliance with Volkswagen Truck & Bus marks a significant milestone in our company’s history, and we expect it will create multiple benefits for both companies in both the near and long term,” said Troy Clarke, Chairman, President and CEO, Navistar. “Now that the transaction has closed, we will move quickly to collaborate with an industry-leading, strategic partner to increase our global scale, strengthen our competitiveness, and provide our customers with expanded access to cutting-edge products, technology and services.”

“The authorities have given our strategic alliance with Navistar the green light. Our newly-founded purchasing cooperation will begin work immediately. This puts both partners in a stronger position for the future. The strategic alliance provides Volkswagen Truck & Bus with access to the all-important North American market. This is a major step toward becoming a global champion,” said Andreas Renschler, CEO of Volkswagen Truck & Bus.

As part of the alliance agreement and in line with Volkswagen Truck & Bus’s ownership stake, Mr. Renschler and Matthias Gründler, Chief Financial Officer of Volkswagen Truck & Bus, are joining Navistar’s board of directors.

Global Truck & Bus Procurement LLC, the procurement joint venture created by Navistar and Volkswagen Truck & Bus, will start work effective immediately. As part of the alliance, it will create new opportunities for quality improvement and cost reduction, and will enable both companies to benefit from increased global scope and scale. The joint venture is operating out of Navistar’s headquarters in Lisle, Illinois, and comprises representatives from both companies who will be combining the demand of five brands, including Volkswagen Truck & Bus’s Scania, MAN and Volkswagen Caminhões e Ônibus, in addition to Navistar’s own International and IC Bus brands.

The companies’ ongoing technology and supply collaboration, which operates out of Stockholm, Sweden, is intended to facilitate collaboration on several aspects of commercial vehicle development, including advanced powertrain technology solutions. Ultimately, it is expected to optimize research and development spend and expand the technology options both companies will be able to offer customers.

Navistar continues to expect significant synergies from both the strategic technology collaboration and the procurement joint venture. As previously announced, Navistar expects the alliance to be accretive beginning in the first year, and for cumulative synergies for Navistar to ramp up to at least $500 million over the first five years. By year five, it expects the alliance will generate annual synergies of at least $200 million for Navistar. This annual run rate is expected to grow materially thereafter as the companies continue to introduce technologies from the collaboration.