Cummins makes offer for VW's large engines unit

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Reuters  /  July 19, 2019

FRANKFURT --  Diesel engine maker Cummins Inc. has made an offer for Volkswagen Group's MAN Energy Solutions unit, people close to the matter said, as the automaker seeks to slim down its portfolio of disparate assets.

Volkswagen announced in May that it is exploring a sale or partnership for its MAN Energy Solutions as part of a restructuring of the German cars, trucks and bus empire.

VW has held talks with Cummins, and received an offer from the U.S. company for MAN Energy Solutions, the sources said.

A Cummins spokesman said: "We do not comment on rumors or speculation in the marketplace."

VW CEO Herbert Diess has vowed to simplify the group which has 12 brands, trucks, buses, motorbikes, cars and electric bicycles as part of its business.

MAN Energy makes large diesel engines used in ships and power stations.

A Volkswagen spokesman on Friday reiterated that VW is reviewing all options for the business, but refused to comment further on Cummins.

Although VW has not yet appointed advisory banks for the sale, it has approached several companies to gauge their appetite for the asset, which is expected to fetch about 3 billion euros ($3.4 billion) the sources said.

To maximize price, Volkswagen has also engaged in talks with Advent-owned engine maker Jenbacher, a former General Electric business, as well as at least one Asian peer, they added. Advent declined to comment. Mitsubishi Heavy Industries and Wartsila have been named as possible bidders in the past.

"Volkswagen originally wanted to strike a sweetheart deal with Cummins, but is now opening up holding talks with some other strategic players," one of the people said, adding that the automaker hopes to sign a deal before year-end.

The VW unit, formerly known as MAN Diesel & Turbo, which also makes turbochargers used in the oil and gas industry, in 2018 reported operating earnings of 133 million euros ($149 million) on sales of 3.1 billion euros ($3.5 billion.)

Volkswagen has struggled to slim down in the past after the company's works council, which has veto power over major restructuring moves, blocked efforts to sell motorbike brand Ducati and transmissions maker Renk.

MAN Energy Solutions was originally a part of VW's trucks brand MAN, but some of MAN's assets were transferred to Volkswagen last year as part of efforts to streamline Traton ahead of its listing.