Dec. 15 (Bloomberg) -- MAN AG will acquire Brazil’s largest truckmaker from Volkswagen AG, MAN’s biggest shareholder, for about 1.18 billion euros ($1.58 billion) in cash, marking the German company’s first major investment in South America.

VW Truck & Bus, based in Resende, Brazil, will become part of Europe’s third-biggest truckmaker on Jan. 1, Munich-based MAN said today in a statement. The boards of MAN and Wolfsburg, Germany-based Volkswagen approved the deal.

“MAN has to expand and we already have a very strong presence in Europe, but with very limited growth potential,” Chief Executive Officer Hakan Samuelsson said at a news conference in Sao Paulo. “We are focusing on being present in growth markets, meaning China, Brazil and India.”

Volkswagen, the owner of 29.9 percent of MAN, had been in talks with MAN for months about the carmaker’s Brazilian truck operations. The maker of the Golf hatchback will retain a presence in the Brazilian truck market through its Scania AB unit. The acquisition gives MAN, which also makes diesel engines for ships and power plants, a strong footing in South America, where it previously had little business.

MAN fell 7.5 percent to 32.61 euros in Frankfurt trading, extending its decline this year to 71 percent. Volkswagen rose 0.3 percent to 306.45 euros.

Buying at Peak

“There’s a bit of a fear that MAN is buying the company at the peak of the Brazilian truck market,” said Marc-Rene Tonn, a Hamburg-based analyst with M.M. Warburg. The price is “at the upper end of what’s justifiable.”

Sales of buses and trucks in Brazil totaled 139,000 vehicles in the year through November, a 26 percent increase from a year earlier, according to the country’s automakers association, Anfavea.

VW Truck & Bus lowered its forecast for 2008 sales to 55,000 vehicles from a September target of as many as 60,000, Roberto Cortes, head of the division, said at the news conference.

The Brazilian unit generated about 1.6 billion euros in sales last year and is profitable and debt-free, MAN spokesman Wieland Schmitz said. The unit employs about 5,000 people and delivered 47,000 vehicles in 2007.

Sales Boost

“We believe the mid-term and long-term growth in the region is attractive,” Samuelsson said. “This is the best way for MAN to take a position in this market,” he said, adding that the acquisition will boost sales by about 15 percent.

The expansion comes with the European market poised for a downturn as a recession puts an end to the recent boom in heavy- truck sales fueled by expansion in Eastern Europe. MAN plans to shut plants for as many as 50 days during the first half of 2009 to curtail output by 30 percent. “2009 and 2010 will be very difficult years for us and all automakers,” Samuelsson said.

Volkswagen said it’s selling the division, which makes heavy-duty trucks, to focus on delivery vans. “With this decision, we are making a logical step in our commercial-vehicle business,” CEO Martin Winterkorn said in a statement. Trucks made by the unit will continue to carry the Volkswagen name.

To contact the reporter on this story: Chris Reiter in Berlin at creiter2@bloomberg.net; Heloiza Canassa in Sao Paulo at hcanassa@bloomberg.net

Last Updated: December 15, 2008 11:46 EST