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Why Navistar Stock Roared Ahead 21% Today

By Rich Smith – Oct 16, 2020 at 11:15AM

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The merger is back on.

What happened

Volkswagen's (VWAGY 0.41%) acquisition of Navistar International (NAV) is back on. Navistar stock gained on the news this morning, up 21% as of 10:40 a.m. EDT.

Two days ago, the German automaker's deal to acquire the American truck maker appeared to be on the rocks. Volkswagen had sent Navistar a letter warning it to essentially put up or shut up -- quit complaining about the price and accept the $43-a-share bid offered by Volkswagen subsidiary Traton by the Oct. 16 deadline, or see Traton withdraw the offer.

Today, Navistar sent a letter to Traton in response, saying that it's prepared to accept an offer of $44.50 per share for all of its shares outstanding.  

Tractor trailer headed downhill on a windy road

Image source: Getty Images.

So what

If you recall, the problem Wednesday was that big Navistar shareholders Carl Icahn and MHR Fund Management wanted to hold out for a $50 to $70 buyout price. Navistar's letter to Traton now indicates, however, that these "two largest shareholders" are on board with a much lower $44.50 buyout price.

That sounds like bad news for other shareholders, who may have been holding out for a higher price. But after watching Navistar's stock price plunge on the prospect that they might get no buyout price at all, today's news must come as a relief.

Now what

Now, it looks like the international merger is going full speed ahead, and Bloomberg reports that all parties are "nearing an agreement to acquire the rest of Navistar International Corp. for $3.69 billion" total at the $44.50 price.

Navistar stock has recovered almost all of its losses of earlier this week and was at $42.85 in morning trading.  

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

Navistar International Stock Quote
Navistar International
Volkswagen AG (ADR) Stock Quote
Volkswagen AG (ADR)
$19.37 (0.41%) $0.08

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