VW Takes $256 Million Stake in Icahn-Backed Navistar (NAV)

• Navistar International Corp. to form a strategic alliance with Volkswagen Truck & Bus.
• The German auto giant taking a 16.6 percent ownership stake in the Chicago-based truck maker.
• The deal is expected to help both sides cut costs, give Volkswagen's trucks business a long-desired foothold in North America and provide a source of new engines for Navistar, which has been looking for a partner ever since its heavy-duty diesel truck engine failed to get approval from U.S. regulators in 2010.

  

Under terms of the deal, Volkswagen Truck & Bus will make an equity investment of $256 million and acquire 16.2 million newly issued shares in Navistar, representing 16.6 percent of post-transaction, undiluted common stock. The equity investment will be used for general corporate purposes.

Volkswagen has agreed to hold the shares for a minimum of three years, and it will have the right to appoint two seats on Navistar's board of directors.

Reuters reports that the deal will provide a source of more environmentally friendly engine technology for Navistar (NYSE: NAV) while giving Volkswagen a share in the North American market. The alliance will also create procurement economies of scale.

The Volkswagen deal comes after Navistar announced this summer it would hire 300 more workers at the Springfield truck assembly plant in a deal with General Motors. The new GM (NYSE:GM) deal calls for Navistar to manufacture the cutaway model of the G Van starting in the first half of 2017, prompting the company to add the new jobs. This comes in addition to 300 jobs the company is adding as it makes trucks for GM, in a separate contract announced last year.