VW Takes Control of Scania, Paving Way for MAN Merger

VW Takes Control of Scania, Paving Way for MAN Merger

March 3 (Bloomberg) -- Volkswagen AG took control of Scania AB, buying Investor AB's stake in the Swedish truck company for 17.6 billion kronor ($2.86 billion) and clearing the way for a merger with MAN AG that would create the European market leader.

Volkswagen bought Investor's holding in Soedertaelje-based Scania for 200 kronor a share, the German company said in a statement today. The purchase gives it 68.6 percent of voting rights, compared with 38 percent previously.

Buying out Stockholm-based Investor AB and the controlling Wallenberg family may end wrangling over a three-way merger between MAN, whose largest owner is also Volkswagen, Scania and VW's own commercial vehicle operations. The combined company would leapfrog Daimler AG and Volvo AB to become Europe's largest truckmaker, with about 33 billion euros ($50 billion) in revenue and 110,000 workers. Scania is especially attractive for a profit margin that was the best in the European industry last year.

``This is a great thing for Volkswagen,'' said Jose Asumendi, an analyst at WestLB in London with a ``hold'' rating on Scania shares. ``Strategically, it is a good price they are paying for what they are getting. Scania is really the crown jewel of truck manufacturers.''

Scania, MAN Gain

Scania rose as much as 22 kronor, or 15 percent, to 172.5 kronor before trading at 155 kronor as of 10:34 a.m. in Stockholm. Munich-based MAN advanced 5.48 euros, or 6.3 percent, to 92.70 euros and was later priced at 91.05 euros. Volkswagen stock was virtually unchanged at 150.04 euros.

``The purchase of the stake underlines the importance that we attribute to our holding in Scania,'' Martin Winterkorn, chief executive officer of Wolfsburg, Germany-based Volkswagen said in the statement. Scania will remain a separate brand and there are no plans for changes that would affect workers, he said.

MAN made a failed 10.3 billion-euro bid for Scania in September 2006. Volkswagen, which was already the largest shareholder in Scania, turned down the offer, bought a 29.9 percent stake in MAN and began negotiations over a tie-up.

``We welcome this latest development since it increases the chances of a cooperation between MAN, Scania and VW trucks,'' MAN spokesman Andreas Lampersbach said today.

MAN and Scania would together have 176,487 heavy truck and bus sales. VW would contribute another 441,700, also including light commercial vehicles such as delivery vans.

Porsche Overtures

Following the purchase, Volkswagen, Europe's largest carmaker, owns a 37.73 percent stake in Scania, up from 20.89 percent. The German company is itself being targeted for takeover by sports-car manufacturer Porsche SE.

Volkswagen has owned a stake in Scania for eight years and expects ``very positive'' business developments at the company, it said today. Winterkorn said Sept. 11 he was seeking a combination agreeable to all sides as hostile mergers often fail.

Winterkorn and Chief Financial Officer Hans-Dieter Poetsch are in Stockholm today and planned to speak with Scania CEO Leif Oestling about the announcement, according to Volkswagen spokeswoman Christine Ritz.

Volkswagen is not required to make a mandatory bid for the rest of Scania because of a prior agreement with regulatory authorities, Ritz said from Stockholm.

Scania's Oestling said Feb. 6 that annual sales growth would exceed an earlier target of 10 percent on booming demand from Russia, where he plans to build a factory and double the dealer network over the next two years. The company had an operating profit equal to 14.4 percent of sales in 2007.

Volkswagen aims to retain ``continuity'' of management at Scania, it said today, without saying which executives would be retained.

BLOOMBERG