Scania Rejects Volkswagen’s $9.2 Billion Bid

[kscarbel]

Financial Times / March 18, 2014

Scania has rejected Volkswagen’s US$9.2 billion (6.7 billion Euro) bid, throwing into doubt the German automotive group’s offer and its plans to create a truckmaker with the clout to rival Daimler.

The independent committee of the board of the Swedish truckmaker said VW’s bid– which represented a premium of about 50 per cent to Scania’s undisturbed share price – “does not reflect the long-term fundamental value of Scania”.

VW was keen to bring Scania – where it already owns 89 per cent of the votes and 63 per cent of the capital – together with its other truck brand, MAN, in an attempt to squeeze out hundreds of millions of Euros in synergies, particularly in developing new trucks.

But the Scania committee, made up of the five board members who are not linked to VW, said that the bid “[does not reflect] a fair share of the expected synergy potential and recommends to Scania’s shareholders not to tender their shares”.

VW now has to choose whether to raise its bid in an attempt to receive a recommendation from Scania’s board, pull out, or go hostile and take its offer directly to the Swedish truckmaker’s minority shareholders. The German group had no immediate comment on Tuesday.

Those shareholders have been split over the merits of the bid. Scania is seen as one of the crown jewels of Swedish industry and observers have noted that VW’s bid comes near the bottom of the truck cycle.

Some shareholders have spoken out against the bid but others – including the Swedish Shareholders’ Association, which has long been critical of VW’s conduct at Scania – were inclined to accept it as a way of ending the current situation where the German group all but controls Scania but has never offered minority investors a premium.

Hans Dieter Poetsch and Leif Oestling, VW’s chief financial officer and head of its commercial vehicles unit respectively, have held a series of talks in Sweden to convince investors of the merits of VW’s offer.

Its bid has raised concerns among trade unionists and investors worried about future employment in Sweden, so the two VW officials have emphasized the group has no plans to cut jobs, plants or move Scania’s headquarters.

Mr. Poetsch has said he was able to clear up any concerns that arose. Conscious that Scania is a fiercely proud truckmaker, VW reminded investors that it has 12 brands stretching from Bugatti to Skoda, each of which it affords a considerable amount of independence.

VW needs 90 per cent of the share capital to achieve a squeeze out. Mr. Poetsch said last week that VW is convinced the offer represents “the maximum value which Scania shareholders can realistically achieve”. He said he was confident of achieving the 90 per cent threshold but said VW would not buy shares if that level could not be reached.

He said that even under Scania's present structure the company had a "positive perspective" within the VW Group. However, VW believes that to tap the full amount of synergies between Scania and MAN it needs to be free of legal constraints at the Swedish truckmaker that stop it from exerting full control.