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Volkswagen’s truck IPO signals bigger change


Volkswagen’s truck division will be valued at as much as €16.5bn in its initial public offering at the end of the month, a step that signalled to investors wider changes are afoot at the world’s largest carmaker.

The German group said late on Thursday it planned to sell shares in Traton, the trucking business that includes VW’s Man and Scania brands, at €27 to €33 each, giving it a valuation of between €13.5bn and €16.5bn. 

VW is only selling a small stake of between 10 per cent and 11.5 per cent — lower than some hopes it would offer a 25 per cent stake — but after VW shelved the deal in March, analysts were cheered that the plan for the IPO remains on track. 

“The transaction itself is small and you could dismiss it in some ways, but it shows VW has heard the message investors have been giving for years: break up, slim down, do something that is manageable,” said Philippe Houchois, analyst at Jefferies. 

Germany’s other corporate giants, including Daimler, Continental and Siemens, have all come under attack in recent years from investors complaining that conglomerate structures set up last century are burying the true value of their businesses. The 12-brand VW group fits that profile but, given it is in effect a family-owned group, it could ignore minority investors. 

However, the high cost of investing in electrification and autonomous driving — VW is spending €44bn in the next five years alone — means the push to unlock more value from the sprawling company is gaining traction. Although recent speeches from executives indicate VW’s top management is on board, the trouble has been convincing labour unions, the State of Lower Saxony and the Porsche-Piëch families who hold voting rights in the group. 

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“Please understand this is a very complicated company,” chief executive Herbert Diess told investors in March. “Our governance is difficult. We have a family. We have the state ownership here. We are strongly unionised. This requires preparation, but we both know that we have a lot of value in the company, which is kind of hidden and which we should bring to light and also it would improve the operations of the company.” 

Volkswagen has also reportedly been sounding out buyers for MAN Energy Solutions, its unit for marine propulsion systems worth about €3bn, adding credibility to the idea that management wants to simplify operations by cutting non-core assets. 

For Arndt Ellinghorst, analyst at Evercore ISI, the listing of Traton should help expose just how undervalued the VW Group is. His sum-of-the-parts analysis gives a valuation of €220bn, about triple its €72bn market valuation. 

“Porsche alone would be worth €130bn on today’s Ferrari valuation,” he said, although his more realistic assessment of the sports car maker is €50bn. “Traton should serve as a role model for what should be considered for other very valuable but hidden brand equity within the VW conglomerate.”

Investors were disappointed in 2017 when the notion of spinning off Ducati, the Italian motorcycle maker, collapsed after labour unions objected, despite it having little to no synergies with the rest of the group. Indeed, Ducati only became a part of VW in 2012 when Audi purchased it as a birthday present, for an estimated €800m, for then-chairman Ferdinand Piëch.



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