Germany’s Daimler signed a $250 million deal on Friday to acquire 10% of leading Russian truck maker Kamaz as it bets on Russia’s commercial vehicle market becoming Europe’s largest.
Kamaz shares rose nearly 8% to greatly outperform a falling market in Moscow, while Daimler’s stock dropped 8.5%. The deal, which will give Daimler a seat on the board of directors at Kamaz, provides for an additional payment of $50 million for the stake in 2012 should the Russian company meet sales and earnings expectations. “The indicators that will be taken into account are sales levels, profit before taxes and net profit,” Ruben Vardanyan, chairman of Troika Dialog, the investment bank selling the stake, told a news conference. He declined to specify the targets.
Andreas Renschler, head of Daimler Trucks, said the car industry was currently facing a “perfect storm,” but added this only increased the appeal of the Russian market, which is poised to become one of the world’s largest for trucks. Daimler, whose trucks unit is the world’s largest producer of commercial vehicles, said in July it was in talks to buy a 42% stake in Kamaz, with plans to eventually increase that to majority control. But Kamaz Chairman Sergei Chemezov said last month the German firm was eyeing a smaller stake of 10%. The global financial crisis had made the price tag of $2 billion for 42% too expensive for Daimler, he said at the time.
The market value of Kamaz has fallen to around $750 million, compared to almost $4 billion at the end of July, when Daimler expressed interest in the larger stake. “Many car makers are on the brink of bankruptcy today,” Chemezov told the news conference on Friday. “The arrival of Daimler gives us a chance to create a modern truck that will sell not only in Russia but also abroad.” Vardanyan said there were no discussions about increasing Daimler’s stake in Kamaz. “We believe discussions about a bigger stake make no sense given today’s economic realities,” he said.
The construction and cement industries, where Kamaz finds most of its consumers, have been among the hardest hit by the financial crisis. Dozens of building projects have been halted since August and plummeting cement prices have forced Russia’s largest producers to scale back growth plans. Kamaz shares were trading up 7.9%, in sharp contrast to a wider 5.5% decline that prompted the MICEX exchange to suspend stocks trading for an hour from 1105 GMT.
Daimler’s stock dropped 8.5% by 1111 GMT to trade at €22.975 per share. The German blue-chip DAX index was down 5.0%. (Reuters)