VW Offers to Buy Out MAN SE Investors to Push Integration

Volkswagen AG, Europe’s largest carmaker, will offer to buy out the rest of MAN SE’s shareholders to take full control of the German truckmaker.

VW, which already holds 75.03 percent of the voting rights, will seek a domination agreement and start talks with MAN’s board, the Wolfsburg, Germany-based automaker said in a statement. The remaining stake is worth about 3.2 billion euros ($4.2 billion) based on yesterday’s closing price.

VW is pushing for deeper integration between MAN, its own commercial-vehicles unit and Swedish truckmaker Scania AB, which it also controls, to leapfrog Volvo AB and Daimler AG as the biggest producer of heavy trucks in Europe. A completed agreement would allow VW to fully integrate MAN into its own operations. MAN shares today gained the most in 7 months.

“Volkswagen will have access to MAN’s cash and they can dictate the strategy,” said Frank Schwope, a Hanover, Germany-based analyst with Norddeutsche Landesbank Girozentrale. “The main consequence will be an intensified collaboration with Scania.”

VW is legally required to look at the average price of the shares in the last three months and the value of the stock based on an independent evaluation of the company, and offer MAN shareholders the higher of the two figures, Christine Ritz, head of VW investor relations, said in a telephone interview. MAN owners who don’t accept the deal will have the right to keep their shares and receive a dividend instead, she said.

MAN Advances

MAN’s common shares surged as much as 5.97 euros, or 7.1 percent, to 90 euros, the biggest gain since June 5, and were up 4.8 percent as of 11:48 a.m. in Frankfurt trading. The stock has climbed 18 percent in the last year, valuing the Munich-based company at 12.9 billion euros. VW was up 0.8 percent at 173.05 euros.

Volkswagen is likely to make an all-cash offer and pay 95 euros per MAN share at most given that the truckmaker’s outlook remains uncertain, said Sascha Gommel, a Commerzbank AG analyst in Frankfurt who has a hold rating on MAN.

MAN’s operating profit fell 39 percent in the first nine months of 2012 to 656 million euros as Europe’s sovereign debt crisis dragged down demand in the region. Revenue declined 3 percent to 11.58 billion euros.

VW, which already holds enough votes to push through the deal at an MAN shareholders meeting, owns 73.7 percent of the total share capital.

Management Reshuffle

“The completion of the deal, including all required shareholder approvals, could drag on into the second half of the year,” Gommel said.

Volkswagen announced a management reshuffle last June meant to push forward the truckmaking cooperation. As part of the changes, Leif Oestling gave up his post as chief executive officer of Scania to join the German automaker’s management board and help forge the alliance. MAN CEO Georg Pachta-Reyhofen, is now overseeing the group’s industrial engines business, along with his duties running the truckmaker.

The maker of the Golf hatchback has been working for six years on closer ties with MAN and Scania. Volkswagen increased its holding in MAN to a majority in 2011, then raised its stake last June to its current level.

“The planned step is a further milestone on the road to creating an integrated commercial vehicles group,” VW said in yesterday’s statement. “MAN would retain its brand specific characteristics and business areas.”

Cash Pile

Volkswagen, which has been on a buying spree in the last year, boosted its cash pile in November when it sold 2.5 billion euros in bonds. Net liquidity at the end of September fell 57 percent to 9.22 billion euros after the carmaker paid 4.49 billion euros for the 50.1 percent of sports-car maker Porsche it did not already own and bought Ducati motorbikes for 860 million euros.

“I expect Volkswagen to gradually increase their stake to about 98 percent to almost 100 percent but not seeking a squeeze out,” Schwope said. “They have all the time in the world and will buy shares whenever the price is favorable.”

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