Navistar International Corp. said a US$3.6 billion takeover offer from Volkswagen AG’s heavy-truck business Traton SE significantly undervalues the company, though it wants to engage in further talks.

Traton’s US$43-a-share bid for the portion of stock it doesn’t already own represents a “starting point for further exploring the possibility of a transaction,” Navistar said Monday. Its shares rose as much as 3.5 per cent to US$43.02 in intraday trading.

Acquiring Lisle, Illinois-based Navistar would bolster VW’s competitive position against the likes of Daimler AG and Volvo AB in the commercial truck sector. Traton already owns almost 17 per cent of Navistar, trailing only billionaire investor Carl Icahn, according to Bloomberg data. It already increased its bid by more than a fifth last week, from US$35 a share offered in January.

Navistar’s statement suggests it is “willing to play ball” with VW, Tom Narayan, an analyst at RBC Capital Markets with a buy rating on the German manufacturer, wrote in a report. “We would not be surprised if a higher price emerges to get the deal done.”

Officials representing the German side and Navistar had been discussing the potential range of a higher offer that would be sufficient to secure access to the target’s books, Bloomberg reported earlier. After resisting this earlier because it considered the initial bid to be too low, Navistar said it would allow Traton to conduct due diligence.

VW and Traton executives earlier this year stoked doubts among investors about whether the deal would move ahead after acknowledging that talks were on hold due to the coronavirus pandemic, though they said there was still strategic rationale for the combination.

VW purchased its stake in Navistar in 2017, laying the groundwork for establishing a footprint in North America, the truck industry’s largest source of profits. The target company builds International trucks, IC buses, defense vehicles and diesel engines.