Daimler is moving ahead with plans for an initial public offering of its sprawling heavy-truck unit in what could be one of Germany’s largest share sales ever.
The Mercedes-Benz maker will spin off a majority of the commercial-vehicle division and may complete the listing before year-end, according to a statement Wednesday. Bloomberg News reported earlier that Daimler could sell a stake in the unit as soon as the second half of the year.
Pulling off the IPO would appease investors who’ve long advocated for the move and mark the latest strategic step taken by CEO Ola Kallenius to revamp the storied German manufacturer. While Daimler recently tweaked its corporate structure to give more independence to its main divisions, the half measure did little to boost the group’s valuation.
“The separation of trucks and premium cars has been a key topic for us for a long time,” Sanford C. Bernstein analyst Arndt Ellinghorst said in a note to clients. “We see very little industrial and cultural logic for combining these two very different businesses.”
Daimler’s truck unit could be worth about 29 billion euros ($35 billion) if valued at multiples similar to Volvo AB, although it would need to substantially improve returns to justify that valuation, Deutsche Bank analysts wrote in a January report. Bernstein’s estimate is even higher at 35 billion euros.
Volvo issued a bullish outlook for the global truck market earlier Wednesday within its report of better-than-expected quarterly earnings. Transport and construction activity has fully recovered in most markets and improved customer confidence, according to the company. It raised its forecast for heavy-duty vehicle sales in Europe and North America this year by a combined 90,000 units.
The results raise the bar for Daimler Trucks, which has long trailed its Swedish rival in terms of profitability. Volvo’s operating margin of almost 13 percent is “the highest the company has ever reached in recent memory,” RBC analyst Tom Narayan said in a note.
Daimler officials previously balked at selling individual divisions in the past but had kept the door open to a partial listing of the trucks unit. German rival Volkswagen Group pushed through an IPO of its truck operation Traton in 2019, and the business now has a market value of almost 12 billion euros ($14.4 billion). Traton agreed last year to acquire Navistar International Corp. to challenge Daimler and Volvo in North America, the industry’s biggest source of profits.
Daimler’s truck division contributed 40.2 billion euros of revenue ($48.3 billion) in 2019, according to the company’s annual report. It sold 488,521 vehicles worldwide and generated 2.46 billion euros in earnings before interest and taxes that year. While the North American Freightliner brand posts robust profits, the European operations have gone through multiple rounds of restructuring.
