VW Gets MAN Majority, Nears Goal of Combining Truck Units

Volkswagen Secures Majority in MAN
The logo of MAN SE sits on the front of a TGX 26.400. VW will own 55.9 percent of the MAN’s voting rights after the deal closes. Photographer: Guenter Schiffmann/Bloomberg

Volkswagen AG moved closer to its goal of unseating Daimler AG as Europe’s largest truckmaker by securing a majority in MAN SE after more shareholders than expected took advantage of a takeover offer.

Europe’s largest carmaker will own 55.9 percent of MAN’s voting rights after the deal closes, the Wolfsburg, Germany-based company said today in a statement. VW sought 40 percent of voting rights in May when it started the bid.

“It’s a clear positive for VW,” said Adam Hull, an analyst with WestLB in London who recommends buying the stock. “The more shares they got, the better.”

The maker of the Golf hatchback triggered a mandatory bid for MAN by raising its stake to 30.5 percent from 29.9 percent on May 9 to pave the way for closer cooperation between the German truckmaker and Sweden’s Scania AB, a unit of VW. A three-way truck alliance may save as much as 1 billion euros ($1.45 billion) in annual costs, according to VW.

MAN fell as much as 2.23 euros, or 2.3 percent, to 93.07 euros and was down 1.4 percent at 11:13 a.m. in Frankfurt. VW rose as much as 0.7 percent.

“Volkswagen is more than pleased with the result” of the tender, Chief Executive Officer Martin Winterkorn said in the statement. As a result of the higher stake, the goal of integrating MAN, Scania and VW’s own commercial vehicle operations is “moving closer,” he said.

Ahead of Volvo

The transaction requires regulatory approval. The combination of MAN and Scania would leapfrog Gothenburg, Sweden-based Volvo AB and Daimler to create Europe’s largest truckmaker. MAN and Scania together had 30 percent of the European heavy-truck market last year, according to the European Automobile Manufacturers’ Association. Volvo and Stuttgart, Germany-based Daimler each had 21 percent.

WestLB’s Hull estimates that VW will have 21 billion euros in net cash at its automotive division by the end of the year.

The VW transaction contrasts with a similar German deal struck in late 2008, when Schaeffler Group acquired more shares in Continental AG than expected in a bid made as financial markets collapsed. The deal saddled Schaeffler, an auto-parts supplier, with a level of debt that has delayed a planned merger.

Standard & Poor’s has a negative outlook on VW’s credit, which it rates as A-, the fourth-lowest investment grade. Moody’s Investors Service and Fitch Ratings have stable outlooks on the company. S&P rates MAN at BBB+, one notch below VW.

Final Days

“Given VW’s huge automotive net cash position and low automotive debt-to-earnings ratio, the company obviously has the financial resources and credit metrics headroom necessary” to complete the deal, said Sven Kreitmair, an analyst at Unicredit in Munich. “We expect MAN in this case now to get upgraded to VW’s credit-rating level, rather than VW to get downgraded.”

Investors took the offer after MAN’s share price declined below VW’s bid in the final days of the tender, which ended on June 29. The stock was above the 95-euro bid when the tender started on May 31. MAN fell to as low as 91.82 euros on June 28.

Ferdinand Piech, who is chairman of both VW and MAN, is pushing the Munich-based truckmaker and Scania to reduce spending as part of a strategy to surpass Toyota Motor Corp. as the world’s biggest automaker by 2018.

VW took a controlling stake in Soedertaelje, Sweden-based Scania in 2008. The increased holding in MAN may allow the two truckmakers to get regulatory approval to share business information and work more closely together.

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