BERLIN: German truckmaker MAN AG announced it is making a 9.6-billion euro offer for Sweden's Scania AB. The deal, when completed, will see the creation of Europe's largest commercial vehicle maker.
The German conglomerate said in a statement it is offering 0.151 new MAN shares plus 38.35 euros in cash for one Scania share. This will give a value of 48 euros for each Scania share. The price represents a 3.7 per cent premium over the price of Scania's B shares at Friday closing.
MAN's Swedish chief executive Hakan Samuelsson said through the combination of the two strong brands and complementary market positions, the new group will be a European champion and a global player positioned to achieve profitable growth in existing and new market.
MAN, based in Munich and now Europe's No 3 truckmaker, said it has already reached an agreement with carmaker Renault SA to purchase its 2.85 per cent stake in Scania, which carries 5.18 per cent of the voting rights. The offer is at a premium of 39 per cent and 36 per cent for Scania class A and B shares respectively, based on the three-month weighted average price leading up to 11 September. The other shareholders of Scania, Europe's fourth largest maker of trucks, include Volkswagen AG, which is its largest shareholder with 18.7 per cent holding and 34 per cent of the voting rights, and Investor AB of Stockholm, which has 11 per cent shareholding and around 29 per cent of the votes.
MAN's statement did not mention about the status of these two shareholders or the stand of Scania's management. It said the offer is a voluntary tender to all the shareholders.
The tie-up will be a direct challenge for commercial vehicle makers Volvo and DaimlerChrysler.
MAN expects the acquisition will contribute to earnings in the first year and forecast with pro-forma sales of 18.5 billion euros and an operating profit of 1.4 billion euros. The unified group is expected to deliver cost synergies of at least 500 million euros per year within three years, while the integration costs will be around 150 million euros.
The bid, which will create a company with commercial vehicle sales of more than 12 billion euros annually, would mark the first trucking industry merger in Europe in five years. In January 2001, Volvo had bought Renault Trucks and its U.S. subsidiary Mack Trucks.
MAN's statement said the offer is subject to customary terms and conditions. These include the condition that the offer should be accepted to such an extent that MAN should have 90 per cent ownership of the total number of shares and votes in Scania, as well as approval by the relevant antitrust authorities.
The company expects to complete the deal before the end of 2006.
MAN assured the management and workers of Scania that sites will not be closed and MAN executives will not necessarily be handed key posts in the new company if their Scania colleagues proved to be more effective. "Management positions would be shared between MAN and Scania managers, based on the principle of 'best person for the job'. Scania executives would take up senior group positions and join the combined group's management board," it said. The unified company's headquarters will be in Munich, but some group functions would be located in Scania headquarters at Sodertalje, Sweden.
Scania also makes industrial and marine engines.
Volvo had made a futile attempt to buy Scania in 1999, but the European Commission had blocked the deal because the two companies together would have a dominant market share in Scandinavia.
A combined MAN and Scania will still be behind Volvo and DaimlerChrysler in global sales. MAN and Scania together sold 120,775 heavy trucks and buses worldwide last year, compared with the 225,054 vehicles that Volvo sold. The two companies do not have any presence in the U.S., the world's largest automobile market.
