Tognum Forecasts Earnings Growth as Daimler, Rolls-Royce Bid

Tognum AG (TGM), the engine maker that Daimler AG (DAI) and Rolls-Royce Group Plc (RR/) are trying to buy, forecast an improvement in earnings this year boosted by sales in Asia.

Earnings before interest, taxes and special items as a share of sales will probably rise to about 10 percent from 9.4 percent in 2010, while revenue may gain more than 10 percent, the Friedrichshafen, Germany-based company said today in a statement. It proposed to raise the amount it pays to shareholders for 2010 to 50 cents from 35 cents the year before.

“We have emerged from the crisis in a strong position and are now looking ahead to the current financial year with confidence,” Chief Executive Officer Volker Heuer said in the statement. “All signs show we’re going for growth.”

Daimler and Rolls-Royce yesterday offered to pay 24 euros a share for Tognum in a joint bid, valuing the company at 3.2 billion euros. The shares advanced 3.8 percent above the offer price after Tognum said the companies had not agreed on a price. Gaining control of Tognum would give the two companies the world’s second-largest maker of high-speed diesel engines for the marine, energy and defense industries after Caterpillar Inc.

Source: Tognum AG via Bloomberg

Tognum AG Chief Executive Officer Volker Heuer. Close

Tognum AG Chief Executive Officer Volker Heuer.

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Source: Tognum AG via Bloomberg

Tognum AG Chief Executive Officer Volker Heuer.

Net income in 2010 dropped 39 percent to 63.2 million euros, Tognum said. Profit missed the average estimate of 69.6 million euros from 11 analysts surveyed by Bloomberg. Sales rose 1.4 percent to 2.56 billion euros last year. The company sells more than 80 percent of its products outside of Germany.

Zetsche ‘Optimistic’

Profit last year was burdened by a 60 million-euro charge for discontinuing its fuel cell activities, which may be transferred to Rolls-Royce in the deal.

The bid is conditional on more than 50 percent of the shares being tendered. Daimler Chief Executive Officer Dieter Zetsche said he was “optimistic” of reaching that target, even as investors lobbied for a higher price. German bank WestLB AG said it expects the bid to be raised to about 27.50 euros.

“This is a takeover story now and people want details, so the earnings move a bit into the background,” said Wolfgang Fickus, a Dusseldorf-based WestLB analyst who recommends buying the shares. Tognum didn’t comment on the bid in today’s release.

Daimler will tender its 28.4 percent holding in Tognum, which Daimler used to own outright, as part of the deal. After the purchase is completed, Rolls-Royce will contribute its Bergen operation, which makes engines for ships and energy generation, Daimler said today in a statement.

The offer is 30 percent above the March 4 closing price, the last trading day before the companies expressed their interest.

To contact the reporter on this story: Cornelius Rahn in Stuttgart at crahn2@bloomberg.net; Chris Reiter in Berlin at creiter2@bloomberg.net

To contact the editor responsible for this story: Chad Thomas in Berlin at cthomas16@bloomberg.net

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