By William Boston 

BERLIN -- Volkswagen AG has valued its heavy-truck business at about $18.6 billion in an initial stock offering set for later this month, the first step in Chief Executive Herbert Diess's plans to overhaul the sprawling automotive group.

Volkswagen said late Thursday it would offer up to 15% of its truck unit Traton SE shares in a range of EUR27 ($30.5) to EUR33 a share, making the initial public offering worth up to EUR1.9 billion and the second-largest IPO in Europe this year, according to Dealogic.

Europe's biggest automotive group by sales is listing its truck business, which includes the MAN and Scania brands, in a long-awaited step to begin chipping off some of the company's divisions no longer deemed necessary for maintaining the core business of building cars and offering new mobility services.

Mr. Diess, speaking at a conference attended by the company's top 500 executives this week, called the truck IPO a milestone for the company.

"For the company, this is the first visible step towards focusing on the core automotive business," Mr. Diess said, according to a transcript of his comments. "At the same time, we are creating the possibility to finance the resource-intensive growth strategy of the commercial vehicles business."

Volkswagen shares fell in Frankfurt on Friday, trading at EUR141.58 at midday, down nearly 1%.

Some investors have been pushing Volkswagen to break out its bigger business divisions to unlock value that is now discounted through the company's conglomerate structure. Volkswagen's market capitalization is currently around $81 billion, but analysts say it could be much higher if the company listed minority stakes of its separate businesses.

"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," Arndt Ellinghorst, an analyst at brokerage Evercore ISI, said in a note to clients Friday.

According to Evercore analysts, Volkswagen could achieve a market value of about $169 billion if it listed stakes in its businesses that span car brands such as VW, Audi, Porsche, Skoda, Seat, Lamborghini and Bentley, motorcycle group Ducatti, Traton's heavy trucks, and new digital businesses grouped under the umbrella of its Moia brand, as well as the company's in-house financial services business.

Volkswagen declined to comment on these estimates.

The listing of Traton is the latest sign that Volkswagen is beginning to take steps to make the company more agile, as the industry is undergoing a shift away from the internal combustion engine to electric cars that are connected to the internet and increasingly a new generation of drivers is more interested in car-sharing than owning their own vehicles.

Volkswagen is planning to invest $50 billion over the next five years to develop technology for electric, connected and self-driving cars. The company said this week that is talks with Ford Motor Co. are nearing completion. The two are discussing an alliance to develop utility vans and trucks, electric cars, and is expected to include cooperation on self-driving car technology.

Traton earned EUR1.7 billion in pretax profit last year and generated EUR25.9 billion in revenue. It has a 17% stake in Navistar International Corp., the U.S. truck maker, and a 25% stake in Sinotruk Ltd, the Chinese truck manufacturer.

Volkswagen has been planning the Traton IPO for three years. In March, the company halted the listing, saying it wanted to wait until market conditions improved. Then, in May, it changed gears and said it would float part of the company by the end of June.

"We are well equipped for the decisive phase," Volkswagen Chief Financial Officer Frank Witter said in a statement. "The clear goal of the listing is to create additional value for our stakeholders."

Write to William Boston at william.boston@wsj.com

(END) Dow Jones Newswires

June 14, 2019 09:10 ET (13:10 GMT)