Tognum AG, the engine maker that Daimler AG and Rolls-Royce Group Plc are bidding to buy, said profitability will grow this year as sales increase in Asia.
Earnings before interest, taxes and one-time gains or costs will probably rise to about 10 percent of sales from 9.4 percent in 2010, Friedrichshafen, Germany-based Tognum said today in a statement. Sales may increase by more than 10 percent.
“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 London-based Rolls-Royce offered to pay 24 euros a share for Tognum in a joint bid yesterday, valuing the manufacturer at 3.2 billion euros ($4.43 billion). 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.
The financial backing of Daimler and Rolls-Royce is “positive” and would help strengthen Tognum’s position in a consolidating market, Heuer said today at a press conference in Stuttgart, Germany, adding that a deal would help growth rather than result in lower costs.
An investment of 1 billion euros over the next three years, part of the takeover offer unveiled yesterday, would be used mainly to boost research and development, Heuer said.
Tognum is trading about 7 percent higher than the offer price. The shares jumped as much as 3.4 percent to 25.74 euros and was up 3 percent as of 1:44 p.m. in Frankfurt.
Net income in 2010 dropped 39 percent to 63.2 million euros, Tognum said. Profit missed the 69.6 million-euro average of 11 analyst estimates compiled by Bloomberg. Sales rose 1.4 percent to 2.56 billion euros.
The company sells more than 80 percent of its products outside of Germany. It proposed raising the dividend for 2010 by 43 percent to 50 cents a share.
Profit last year was burdened by a 60 million-euro charge for discontinuing its fuel-cell operations, 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 yesterday that he’s “optimistic” of reaching that target, even as investors lobbied for a higher price. German bank WestLB AG said yesterday that 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 Tognum shares.
Daimler will tender its 28.4 percent holding in Tognum, which the Stuttgart-based carmaker used to own outright, as part of the deal. After the purchase is completed, Rolls-Royce will contribute its operation in Bergen, Norway, which makes engines for ships and energy generation.
The offer is 30 percent more than Tognum’s March 4 closing price, the last trading day before the companies expressed their interest.
Heuer, Chief Financial Officer Joachim Coers and board member Rainer Breidenbach together owned 5.3 percent of Tognum’s shares as of the end of 2010. CEO Heuer plans to hand over his job to Coers on Sept. 30.