By Gabriel Araujo

SAO PAULO (Reuters – Brazilian auto parts manufacturer Tupy SA announced on Monday that it has reached a deal for the acquisition of motormaker MWM. Formerly known as International Industria Automotiva da America do Sul. This will send its shares up sharply.

Tupy stated in a Securities filing that the deal had an enterprise value at 865 million Brazilian reais (or $1184.2 million).

Navistar International Corp (NYSE:) owns MWM, a subsidiary German-based car maker Traton Se. Tupy reported that the company had an operating net income of 2.7 million reais for 2021.

Tupy stated that the company produces engines for North American, European, and Brazilian trucks and buses. It also transforms motors so they can run on biodiesel or biogas.

It stated that the transaction was in keeping with Tupy’s current growth strategy, adding value to products and in encouraging viable decarbonization options, taking advantage of Brazil’s high biofuels potential.

Tupy’s shares rose 8% to 18.11 reais midday, surpassing Brazil’s main stock market index, which lost 0.1%.

Analysts from BTG Pactual (which rates Tupy Buy) said that the deal would increase the company’s worth.

They stated that they believe the deal adds strategic value to Tupy by increasing the company’s exposure to decarbonization and the aftermarket.

Tupy indicated that the company is currently evaluating its capital allocation strategy for paying for the deal. It will consider third-party funding, as well as internal resources. Once the deal has been closed, payment will be made.

Brazil’s Antitrust Watchdog CADE must approve the transaction.

($1 = 4.6965 reais)