When the mayor of Scania AB’s hometown learned late Friday of Volkswagen AG’s plan to take full control of the truckmaker, she hit the phones.
The more-than 9,000 workers Scania employs in Sweden make up about 10 percent of the population of Soedertaelje, a town some 20 miles southwest of Stockholm. Mayor Boel Godner, who’s in regular contact with her town’s biggest private employer, says her main concern now is whether all those jobs will survive an offer by Europe’s largest automaker to buy the Scania shares it doesn’t already own.
“Every event involving Scania creates worries until we know what kind of changes they may lead to,” Godner said in an e-mailed response to questions on Feb. 22. “I follow everything involving Scania intensively.” The mayor says she had members of Scania’s executive team on the phone the night of Feb. 21 to discuss VW’s plans. She declined to comment on the outcome of those conversations.
Some of Sweden’s biggest employers are cutting thousands of jobs to stay competitive. Volvo AB, the world’s second-largest truckmaker, said this month it needs to eliminate 4,400 positions to save money. As Swedes prepare to vote in September elections, the government of Prime Minister Fredrik Reinfeldt has made reducing Scandinavia’s highest unemployment rate a key plank of his campaign. Joblessness rose to 8.2 percent last month, Statistics Sweden said Feb. 13.
“Scania is of enormous importance to Soedertaelje and for the Swedish export industry,” Godner said. “Everyone in Soedertaelje has a relation to Scania.”
VW, which offered 6.7 billion euros ($9.2 billion) for the rest of Scania, says it needs full control of the company to save money and improve its business. To achieve that, “Sweden, Scania’s locations, and above all the employees of Scania, will play a central and strategic role in the integrated commercial vehicles group,” Chief Executive Officer Martin Winterkorn said in a statement.
Price developments today indicate investors expect the offer to be successful. Scania rose 32 percent to 194.5 kronor at the close of trading in Stockholm, its steepest advance since April 1996 and close to the 200 kronor per share VW is offering. That price compares with the Feb. 21 closing price of Scania’s B shares of 147.50 kronor. The stock has gained 7.4 percent in the last 12 months through Feb. 21, valuing Scania at 116.8 billion kronor.
Since becoming CEO in 2007, Winterkorn has overseen acquisitions of sports-car maker Porsche, Ducati and commercial vehicle maker MAN SE. None of those deals led to mass job cuts.
VW Chief Financial Officer Hans Dieter Poetsch said Feb. 21 Scania will keep its headquarters in Sweden and remain an independent brand within the group. Still, Scania has rejected takeover offers in the past. In 2006, an unsolicited bid by MAN under then CEO Hakan Samuelsson to buy Scania was actively opposed by Swedish labor unions. The attempted takeover failed and VW raised its stakes in both MAN and Scania in the following years.
Though VW’s latest bid represents a 36 percent premium on the Feb. 21 closing price of Scania’s B shares, a number of minority shareholders raised doubts.
“Scania’s prerequisites to maintain its leading position are better as a listed company than as a subsidiary in a larger group,” Caroline af Ugglas, head of equities and ownership at pension provider Skandia, which is Scania’s seventh-largest shareholder with 0.8 percent of the stock, said in an e-mailed response. “Skandia doesn’t intend to accept the offer.”
Alecta, the fourth-largest shareholder with 2 percent of Scania’s stock, says it will “evaluate the bid carefully, from all aspects.” Swedish pension fund AP4, the ninth-largest shareholder with 0.6 percent of the shares, said the offer “must be evaluated in light of the duty we have to our pensioners and it is not obvious that that is the stock market price plus a few percent.” Nordea Fonder, another shareholder, said today it intends to accept the “attractive” offer.
Swedbank Robur, the fifth-largest shareholder in Scania with 1.9% of the share capital, said today that it will focus on a number of key issues when evaluating VW’s offer, including the company’s “rather special ownership situation where the minority has limited influence.” The asset manager will also keep in mind that “Scania is a nice company,” Paer Baeckman, a spokesman for Swedbank Robur, said by telephone today.
VW only plans to pursue the bid if it can secure 90 percent of the shares in Scania, which the German automaker needs under Swedish law to force remaining minority owners to sell their stakes. VW currently controls 62.6 percent of the share capital.
Scania’s hometown is struggling with a jobless rate that’s almost twice the national average; unemployment reached 14.3 percent in October. The town is known locally as Little Baghdad following an influx of Middle Eastern immigrants that started in the 1960s. Many of these people now provide the backbone to a base of industrial workers anxious about the prospect of foreign ownership of their biggest employer.
“If the VW deal would result in jobs disappearing to other cities or countries, it would be a big blow to the city,” said Afram Yakoub, chairman of the Assyrian Federation of Sweden. “Many are of course worried about what could happen despite reassurances from VW. I think many people in Soedertaelje would feel safer if there was continued Swedish influence in the company.”
Dagens Nyheter, Sweden’s biggest morning newspaper, in an editorial piece today dubbed the German automaker’s bid “part of the VW patriarch’s imperial dreams.”
“That Scania becomes wholly owned by Volkswagen is not good for either Scania, Soedertaelje or Sweden,” Dagens Nyheter said. “VW’s guarantees that the jobs will remain in Sweden don’t apply in the long-term.”
The IF Metall union, which represents more than 2,700 workers in the town, said today that it is seeking binding guarantees from VW that the German company will safeguard jobs and development in Sweden and Soedertaelje.
While former Scania CEO Leif Oestling, currently head of VW’s truck operations, said in a conference call that VW plans no material changes at Scania, Michael Gustafsson, deputy chairman of the IF Metall union in Soedertaelje, said that those guarantees is “what we want to get down in a more binding document than a press conference.”
Back at the town hall, Godner urged VW to keep the future of her local community in mind.
“It’s important that the owners realize how incredibly important Scania is for Soedertaelje and Sweden,” Godner said.