Daimler Announces Talks With KamAZ

German auto giant Daimler on Friday announced that it was in talks to buy a 42 percent stake in truck maker KamAZ in a potential deal valued at $1.7 billion.

Part of the group that produces Mercedes-Benz cars, Daimler Trucks, said it is now the exclusive negotiating partner for the shares, which are held by investment bank Troika Dialog, Daimler said in a statement.

"Along with the option of building a new factory for local assembly of Daimler Trucks, the division is also studying the possibility of acquiring a stake in ... KamAZ that would enable the two companies to combine their development, production and sales expertise," the company said in a statement.

Daimler said it was interested in KamAZ, which builds nearly three-quarters of the country's large trucks and about half of its other large cargo vehicles, because the firm has "production facilities, sales structures and a good network in Russia," it said.

KamAZ has a market capitalization of nearly $4 billion.

Sergei Chemezov's state corporation, Russian Technologies, which owns 37.8 percent of KamAZ, announced that it was looking at the possible deal "very positively."

Troika Dialog said that in June it had invited potential buyers including Volvo of Sweden, Fiat unit Iveco and Daimler to bid for its minority stake in KamAZ.

KamAZ reported that its 2007 revenue rose by about 23 percent to 85.25 billion rubles ($3.65 billion) on the back of truck sales increasing by 20 percent.

The firm sold 52,648 trucks last year, around three quarters of which were sold in Russia. Last year, Daimler sold 467,700 trucks.

"With its potential for dynamic growth, the Russian truck market is widely considered to be one of the top future sales markets for commercial vehicles," Daimler said in a statement.

The firm noted that Russia is Europe's largest truck market, 154,000 trucks of more than 6 tons sold in 2007.

"Sales of new trucks in Russia are expected to increase by about 20 percent over the next two years. This development is being driven by the demand for heavy-duty trucks in particular," it said.

Heinz Gottwick, chief spokesman for Daimler in Germany, said he believed that negotiations would be completed by the end of the year.

Gottwick said Daimler was always looking for "different opportunities out there, and we will choose the optimal one." He added, "It is unlikely that we will buy a stake in the company and also build a factory at the same time."

Daimler shares, which fell nearly 10 percent Thursday after it cut its earnings outlook for this year, closed up 1.1 percent Friday at 38.88 euros.

On the MICEX exchange, KamAZ shares dropped 2.3 percent Friday.

No one at KamAZ was immediately available for comment Friday.

Another leading European truck manufacturer, Scania, on Friday said sales in Russia had surged.

Scania, Sweden's second-largest truck maker after Volvo, said profits in the second quarter rose the most in almost two years because of higher demand in Russia, even with dropping sales in Western Europe.