Volkswagen AG (VOW) declined to raise a 6.7 billion-euro ($9.33 billion) bid for the rest of Scania AB (SCVA) after a board committee at the Swedish truckmaker recommended minority owners reject the offer as being too low.
“We explicitly do not share their view on the valuation,” the Wolfsburg, Germany-based automaker said in a statement today. The current offer “represents a highly attractive and balanced deal” and one that would “allow Scania shareholders to realize the maximum value they can realistically expect from their investment.”
The 200 krona-a-share bid is 36 percent higher than the Soedertaelje-based company’s closing price on Feb. 21, when Volkswagen announced its plan for a full takeover. The tender period began yesterday and ends April 25.
The rejection is a blow to VW’s effort to restart a stalled plan to create a global heavy-trucks unit that can compete with industry leaders Daimler AG and Volvo AB. (VOLVB) VW has reaped limited financial rewards for the billions invested in the last decade to purchase controlling stakes in the Swedish company and German truckmaker MAN SE (MAN) as minority investors resisted efforts to share technology that would boost profit.
“The long-term fundamental value of Scania as we see it means that this price undervalues our picture of the future,” Aasa Thunman, chairman of the committee, said earlier today at a Stockholm press conference. “We do stress that this is a very employee-driven company and that is a key to its success.”
In turning down the bid, the Swedish company said it’s made “significant investments” for new products, and that the operating margin will improve in the coming years as a result. The return on sales in 2013 was 9.7 percent.
Scania slumped as much as 11.90 kronor, or 6.1 percent, to 184 kronor in Stockholm trading, its steepest intraday decline since July 22 and lowest price since the day the offer was made. The stock traded down 3.8 percent as of 1:31 p.m. VW was 0.7 percent higher in Frankfurt.
The Swedish Shareholders’ Association, which represents thousands of small investors, said today it will examine the committee’s report before making a recommendation.
“We still welcome an offer as the situation with a majority owner that cannot represent the minority owners is untenable,” Carl Rosen, the association’s chief, said in a phone interview. “We expect that VW, if they want to complete the transaction, will come with a new offer.”
VW and Munich-based MAN together have 62.6 percent of the equity in Scania and 89.2 percent of the votes. Scania and MAN both make heavy trucks, while VW’s own commercial-vehicles business produces delivery vans and the Amarok pickup.
VW has only achieved 200 million euros in savings from Scania, its van unit and MAN. VW’s goal is to deepen cooperation between the three in areas such as drivetrains, chassis, cabins and electronics to reach annual operating profit synergies of 650 million euros. Scania said that, although it cooperates with MAN on 100 initiatives, the 2014 financial benefits to the Swedish truckmaker will be limited.
“Scania is today leading in the truck market, so Scania would be the one sharing its knowledge, competence and development,” Peter Wallenberg Jr., a committee member, said in an interview after the press conference. “Scania has shown that the relationship between the companies has been positive, and Scania has developed as a company. One can’t really criticize how things work today.”
The combination of MAN and Scania would be bigger than Volvo, currently the second-largest global truckmaker. The two VW units’ 2013 deliveries totaled 220,800, compared with 200,300 for Volvo. Daimler sold 484,200 trucks last year. The three manufacturers would vie for the lead in Europe.
Scania’s truck orders in January and February were on a comparable level to a year earlier and its market share in Europe in the first two months increased to 14.9 percent from 14.7 percent, the Swedish company said today.
The European heavy-truck market has suffered from the region’s sovereign-debt crisis as the stumbling economy sapped demand. Industrywide sales last year of 240,000 vehicles were 25 percent below the 2007 level.
Scania’s minority investors have thus far not bought into VW’s integration plan. Some last month asked for an independent auditor to examine whether ownership of the company by VW and MAN poses a conflict of interest. They oppose the elimination of a board-nominating committee and a 16 percent cut in the dividend for 2013 to 4 kronor per share.
VW reiterated today that it 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 company. The automaker already has a domination agreement with MAN, which means the two can legally work more closely. That leaves Scania as the last unit preventing VW from creating an integrated heavy truck division.
Alecta, Scania’s sixth-largest owner with 2 percent of the share capital, said it will consider the committee’s recommendation when evaluating the offer.
“We continue our evaluation of the offer and don’t plan to comment on the bidding process until we have made a final decision,” the company said in a statement on its website.
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