Daimler AG will split up into the world’s largest makers of luxury cars and commercial vehicles, renaming itself Mercedes-Benz and listing its truck unit separately by year-end.
The plan to distribute a majority of Daimler Truck to shareholders is the German manufacturer’s most significant shake-up since the sale of Chrysler almost 14 years ago. Bloomberg News reported earlier that Daimler was considering the listing.
The spinoff appeased investors who have advocated the move for years, citing a stubbornly low valuation for the group company. While Daimler recently tweaked its corporate structure to give more independence to its main divisions, the change did little to boost sentiment.
Daimler shares surged 8.9% to 64.56 euros on Wednesday in Frankfurt, their highest close since May 2018.
The Mercedes-Benz cars and Daimler truck divisions “are different businesses with specific customer groups, technology paths and capital needs,” Chief Executive Officer Ola Kallenius said in a statement. “We believe they will be able to operate most effectively as independent entities, equipped with strong net liquidity and free from the constraints of a conglomerate structure.”
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 said last month. Sanford C. Bernstein’s estimate is even higher, at 35 billion euros.
“The outcome is extremely positive for all shareholders and we’re convinced that this is also in the best interest of all employees at Daimler,” Bernstein’s analyst Arndt Ellinghorst said in an email. “It’s also a strong positive statement for the German corporate landscape and financial market.”
Making Mark
Kallenius is making his mark on Daimler since becoming chief executive officer in May 2019. The company’s earnings and stock price started to languish late in the 13-year rein of his predecessor, Dieter Zetsche, forcing the new CEO to issue several profit warnings early in his tenure.
The 51-year-old Swede plans to revive returns by focusing more on bigger cars such as the flagship S-Class sedan and cutting thousands of jobs. He has forged a deeper partnership with Aston Martin Lagonda Global Holdings Plc and teamed up with technology firms to boost the company’s software operations. By the end of the decade, more than half of Mercedes’s global sales will be electrified.
This article was provided by Bloomberg News.
