Scania AB (SCVB) minority owners expressed doubts about backing Volkswagen AG (VOW)’s 6.7 billion-euro ($9.2 billion) bid for the rest of the truckmaker, with some suggesting the offer may be too low and others saying the Swedish company should retain its relative independence.
“Scania’s prerequisites to maintain its leading position are better as a listed company than as a subsidiary in a larger group,” said Caroline af Ugglas, head of equities and ownership at pension provider Skandia, which owns 0.8 percent of Scania. “Skandia doesn’t intend to accept the offer.”
VW only plans to pursue the bid if it can secure 90 percent of Scania, which is the threshold needed under Swedish law to force the remaining owners to sell their holdings and delist the Soedertaelje-based company. VW, Europe’s largest automaker, currently controls 62.6 percent of the share capital. Scania’s board said today that a committee independent of the VW members will evaluate the bid and make a recommendation whether to accept the offer at a later date.
VW’s goal is to deepen cooperation between Scania, its own commercial vehicles unit and MAN SE (MAN), which it also controls, in areas such as drivetrains, chassis, cabins and electronics. Such moves have faced resistance from Scania’s minority holders who argue doing so is a disadvantage for the manufacturer, which is more profitable than MAN.
VW is offering 200 kronor per share, 36 percent above the Feb. 21 closing price of 147.50 kronor for the company’s B stock. The shares have gained 7.4 percent in the last 12 months, valuing the Swedish truckmaker at 116.8 billion kronor ($17.9 billion).
“This must be evaluated in light of the duty we have for our pensioners and it is not obvious that that is the stock market price plus a few percent,” said Mats A. Andersson, head of the AP4 pension fund, which owns Scania shares. “We must now take a look at the offer and consider it and make an evaluation based on what a long-term owner finds is good.”
By more closely integrating its truck operations, VW said Feb. 21 that it can eventually achieve annual operating profit synergies of 650 million euros. To get there, VW needs to buy out Scania’s other investors, some of whom this month asked for an independent auditor to examine whether ownership of the company by VW and MAN poses a conflict of interest.
“There is a lot of frustration regarding how VW has treated their minority shareholders,” Carl Rosen, head of the Swedish Shareholders’ Association, said in an interview after VW announced the bid. “We think it is positive that they make this offer.”
Investors have objected to Scania’s plan to cut its dividend and the abolition of a board-nominating committee. The board of directors proposed last month reducing the dividend by 16 percent to 4 kronor a share from 4.75 kronor.
Scania’s 2013 operating profit rose 2 percent to 8.46 billion kronor. In the first nine months of 2013, Scania’s profit margin was 9.4 percent, while MAN’s was just 0.4 percent. MAN has yet to release full-year results.
“Alecta will evaluate the bid carefully, from all aspects,” Johan Andersson, a spokesman for the occupational pension company that is Scania’s fifth-largest shareholder with 2 percent of the capital, said in an e-mailed response.
Goldman Sachs Group Inc. and Rothschild are VW’s financial advisers on the Scania offer, according to a statement on VW’s website. Roschier Advokatbyraa AB and Clifford Chance LLP are serving as legal advisers.
VW currently controls 62.6 percent of Scania’s share capital via its direct holding and a stake owned by MAN. The German automaker started buying stock in the Swedish manufacturer in 2000 and acquired majority voting control in March 2008.
The automaker already has a domination agreement with MAN, which means the two can legally work more closely. That leaves Scania as the last of the three units preventing VW from fulfilling its goal of creating a heavy truck division that can better compete with global leaders Daimler and Volvo AB. (VOLVB)
VW first acquired shares in MAN in 2006 to thwart the German truckmaker’s effort to take over Scania. VW, which now owns 75 percent of MAN, is required by law to offer to buy out the remaining owners and faces lawsuits from dozens of investors seeking a higher price.
VW is proposing purchasing the truckmaker’s remaining stock for 80.89 euros a share. MAN closed Feb. 21 at 93.35 euros. Investors who don’t accept the cash will receive an annual dividend of 3.07 euros per share.
VW Chief Financial Officer Hans Dieter Poetsch said Feb. 21 that Scania will keep its headquarter in Sweden and remain an independent brand within the group. Poetsch pointed to the success of sports-car maker Porsche, which will meet a target for 200,000 deliveries three years earlier than planned, as an example of how a marque can thrive after being bought by VW.
“If you look at Porsche, the brand developed extremely positively after the takeover,” he said. “We want to improve the performance of our businesses” and not cut them down.