Scania Says Arms-Length Policy Remains Amid Auditor Push

[kscarbel]

Bloomberg / August 29, 2013

Scania said an arms-length policy on cooperation with majority investor Volkswagen and MAN remains in place after a Swedish shareholders group called for an independent audit of the companies’ transactions.

“If a third party buys something from us, we transfer value in the form of a product and get money for that, and the same principle should apply when you cooperate with someone,” Erik Ljungberg, a spokesman at Soedertaelje, Sweden-based Scania, said in a phone interview today. “If we are going to cooperate on something, it must benefit us, we must gain from it. If we do, everyone benefits.”

The Swedish Shareholders’ Association, which represents individuals with small stakes in the country’s traded companies, called this month for an independent monitor to evaluate cooperation between truckmaker Scania and Wolfsburg, Germany-based Volkswagen, Europe’s biggest car manufacturer, to ensure that minority investors’ interests aren’t overlooked.

The group is seeking the support of investors controlling 10 percent of Scania stock to call a shareholders’ meeting to appoint the outside overseer.

“We want a special independent auditor to evaluate whether cooperation and the transfer of value is done in a proper way,” Carl Rosen, head of the association, said in a phone interview yesterday. “If you look at how VW has acted before, they are infamous for not caring much about minority shareholders.”

Volkswagen’s Role

Volkswagen bought 18.7 percent of the capital in Scania and 34 percent of the voting rights in 2000. While helping the Swedish company fend off a takeover by Munich-based truckmaker MAN, VW also began accumulating stock in the German manufacturer to push a combination of the three companies’ commercial-vehicle operations.

VW now owns 46 percent of Scania’s equity and 71 percent of the votes, while MAN holds 13 percent of the stock and 17 percent of the votes. VW’s stake in MAN exceeds 75 percent, and the carmaker is in the process of buying full control.

Scania’s board outlined terms in July 2008 on cooperation with the Volkswagen group “to ensure that all corporate benefit issues with related parties are handled in accordance with the arms-length principle,” the Swedish truckmaker said in a statement yesterday. “The board of directors is continuously reviewing this policy.”

Investors’ Cost

Smaller Scania stockholders lost out on 15 billion kronor ($2.3 billion), or 18,000 kronor per investor, when Volkswagen and MAN took control of Scania and avoided making a bid for all the shares, the shareholders association said in the statement calling for an auditor. Investor AB, the publicly traded holding company of Sweden’s billionaire Wallenberg family, sold its A-class shares in Scania at 30 percent to 40 percent more than the stock’s market price, the association said.

Minority holders’ interests were ignored earlier this year when Scania’s board removed the nomination committee that usually proposes members to a company’s board, the association said.

Marco Dalan, a spokesman for Volkswagen, declined yesterday to comment on the Swedish association’s statement.

Investors are concerned that a 1 billion-euro ($1.33 billion) cost-savings plan for Volkswagen’s truck units, including Scania, won’t reflect market conditions, association head Rosen said. Now that VW dominates MAN, shareholders in Scania are the only minority investors in the VW group, according to Rosen.

Besides VW and MAN, major owners of Scania stock include Swedbank Robur funds, Alecta, AMF, Skandia Liv and Handelsbanken Fonder. About 100,000 smaller investors directly hold about 5 percent of Scania stock, while millions of Swedes are indirect shareholders through funds and insurers, according to the association website.