Daimler to keep 35% stake as trucks’ business goes solo

Daimler will keep a 35% stake in the trucks division it plans to spin off this year, the luxury carmaker said on Friday, giving more details on a landmark corporate split it hopes will boost share values.

The spinoff of Daimler Truck Holding AG as a separate listed entity, first announced in February, will be voted on by Daimler shareholders at an extraordinary general meeting on Oct. 1.

They will receive one share in the trucks division for every two Daimler shares they own.

Daimler, in turn, will be renamed Mercedes-Benz Group AG to reflect its focus on the car and van business, including the Mercedes-Benz brand, and efforts to challenge Tesla and other rivals in the market for electric premium cars.

“Daimler’s realignment makes one success story into two,” Daimler Chief Executive Ola Kaellenius said.

“With this courageous step into a new future, we are creating added value with two pure-play companies for our customers, employees, shareholders and partners.”

Daimler will provide Daimler Truck Holding AG with net liquidity of 5 billion euros ($5.9 billion) until the end of the year, when the truckmaker’s shares are expected to start trading, so that it can achieve an investment-grade rating.

Spin-offs, under which existing shareholders get shares in the new vehicle for free, have been a prominent way for large corporations to unlock value and respond to investors demanding a sharper business model.

Daimler shares are up about 17% since the spin-off announcement, in line with the broader European automotive sector.

“Up until now, we had to travel in a convoy. In the future, we will be able to plan our own route and choose the best route for us,” said Martin Daum, designated chief executive of Daimler Truck Holding AG.

Of the 35% Daimler plans to retain in the division, which is the world’s largest truck and bus maker and will be a contender for Germany’s blue-chip DAX index, 5% will be transferred to the carmaker’s pension fund.

As of Jan. 1 2021, Daimler Truck Holding AG shareholders’ equity on a pro-forma basis stood at about 11.1 billion euros, equivalent to an equity ratio of 22%, Daimler said. Vehicle maker CNH Industrial ups forecasts after profit beat.

The spinoff of Daimler Truck Holding AG as a separate listed entity, first announced in February, will be voted on by Daimler shareholders at an extraordinary general meeting on Oct. 1.

Meanwhile, Italian-American vehicle maker CNH Industrial on Friday raised its revenue and free cash flow forecasts for this year after its second-quarter results exceeded expectations, as it benefited from an industry cyclical upturn.

CEO Scott Wine said a “robust environment” contributed to expand the company’s order books and to an “excellent” performance across all its main businesses, which include Iveco commercial vehicles, agricultural machines, construction equipment and powertrains.

“Despite ongoing supply chain challenges and inflationary pressures, the continued strength of our end markets in conjunction with aggressive pricing activity, margin expansion initiatives ... propelled us to record second quarter earnings,” Wine said.

CNH, controlled by Exor, the holding company of Italy’s Agnelli family, last month announced a $2.1 billion deal to buy U.S.-based Raven Industries to bolster its agricultural equipment business, as it prepares to spin off its truck, bus and engine operations.

The acquisition - which is expected to be finalised in the fourth quarter - will add “significantly” to CNH’s precision agriculture capabilities and help make it a “sustainable competitive advantage,” Wine said. CNH’s adjusted operating earnings (EBIT) of industrial activities stood at $699 million in the second quarter, versus a $58 million loss a year earlier.

That compares with a $496 million forecast in an analyst poll compiled by Reuters.

Sales at the group’s industrial activities rose 65% in the April-June period to $8.49 billion, topping a $7.06 billion analyst forecast.

Milan-listed shares in CNH turned positive to rise as much as 1.7% after results were published. By 1350 GMT were up 0.6%.

The group forecast that sales from industrial activities will grow this year by 24%-28% versus a previous forecast of between 14%-18%.

Free cash flow is now seen in excess of $1 billion this year, from a previous forecast of $0.6 billion-$1.0 billion.

“CNH Industrial is poised for a noteworthy second half,” Wine said.