[FRANKFURT] Volkswagen AG valued its heavy-trucks business at as much as US$18.6 billion in a planned initial public offering that will test Chief Executive Officer Herbert Diess's ambition of overhauling the carmaking behemoth.

The manufacturer intends to offer stock in Traton SE, which sells MAN and Scania AB vehicles, for between 27 euros to 33 euros per share, it said in a statement Thursday, valuing the division at 13.5 billion euros to 16.5 billion euros (S$25.4 billion).

It's set to be one of the year's largest European public offerings. While trade jitters and a slowing global economy have weighed on recent IPO deals, industrial companies like Switzerland's Stadler Rail AG and Germany's Knorr-Bremse AG, which listed in October, have fared well.

Listing Traton is management's highest-profile most notable move in a push to make the world's largest automobile manufacturer more agile, which includes potential plans to shed assets, seek cooperations and freeing up units to make decisions. Mr Diess is considering selling operations that builds ship engines and large transmissions while teaming up with Ford Motor Co on vans and likely electric and autonomous cars.

While seeking to allocate investments more efficiently, the moves are also aimed at increasing the stock price and giving VW more financial flexibility. The company has committed to spending 44 billion euros through 2023 on electric and connected cars, with the payoff likely years away leaving the company's valuation to trail the broader market.

VW's plans for Traton and with Ford will help create "currency" for the upcoming phase of industry consolidation, Mr Diess told a gathering of top executives on Thursday. In the truck division alone, VW plans to challenge industry leaders Daimler AG and Volvo Group in markets such as North America and China. This may include potentially boosting its 16.8 per cent stake in US peer Navistar International Corp.

"This IPO represents a much needed 'first step' structural change at VW as the management team seeks to unlock value during a period of significant and transformational industry changes," Evercore ISI analyst Arndt Ellinghorst said in a note.

Volkswagen shares trade at 6.2 times earnings, compared with an average multiple of 16.1 for Germany's Dax Index companies. The company declined 0.6 per cent to 141.94 euros at 9:49 am in Frankfurt trading, paring gains this year to 2.2 per cent. Global stocks have struggled in recent weeks as trade frictions jeopardize global economic growth.

VW has been working toward a listing of Traton for more than three years, reviving plans last month that were shelved earlier in the year.

"We are now all set for the decisive phase," VW Chief Financial Officer Frank Witter said in the statement. "The IPO is driven by the aim to create value for our stakeholders."

VW is targeting proceeds from the IPO of as much as 1.9 billion euros. The proposed price range follows Volkswagen's announcement this month of a public listing for its wholly owned Traton subsidiary in Frankfurt and Stockholm.

The base offer will be 50 million shares, with a possible over-allotment of as many as 7.5 million shares, subject to the use of a so-called green-shoe option for rights to additional stock, VW said. Trading is set to start on June 28 and the company is targeting a free float of 10 per cent to 11.5 per cent of Traton's shares.

BLOOMBERG