MAN SE Chairman Expects Legal Battle Over VW Offer PriceChristoph Rauwald
Ferdinand Piech, supervisory board chairman at both Volkswagen AG and MAN SE, said he expects a legal battle with minority shareholders seeking a higher price than what VW is offering for the rest of German truckmaker.
“We’ll see each other in front of a court for a long time -- that’s what I assume,” Piech said late yesterday at MAN’s annual meeting after several lawyers, including Dusseldorf-based Peter Dreier from law firm Dreier Riedel Rechtsanwaelte, raised doubts over VW’s valuation of MAN.
VW gained shareholder approval last night for a profit transfer and domination agreement, which eliminates the need for arm’s length negotiations between the companies and gives the carmaker access to MAN’s cash. The vote was never in doubt because VW’s voting stake of just over 75 percent gave it sufficient muscle to push through the plan.
VW, which is required under German law as part of the agreement to offer to buy out minority owners, is proposing purchasing the truckmaker’s remaining stock for 80.89 euros ($107.17) a share. Investors who don’t accept the cash deal will receive an annual dividend of 3.07 euros per share. The shares traded today at 83.85 euros.
“Due to the intensive discussions we expect that several investors and shareholders will call for a legal challenge to check the offered compensation,” Michael Punzet, an analyst at DZ Bank AG in Frankfurt, said in a note to clients. “The expected legal challenge against the valuation of MAN as part of the domination agreement might lead to a delay.”
The pact will take effect once it is entered in Germany’s commercial register. The company can file for legal approval to implement the agreement even if the lawsuits are still pending. That process can lead to a delay of several weeks or months.
MAN shares gained as much as 89 cents, or 1.1 percent, to 84.06 euros and were up 0.8 percent as of 11:33 a.m. in Frankfurt trading. The stock has climbed 3.8 percent this year, valuing the German manufacturer at 12.3 billion euros.
MAN Chief Executive Officer Georg Pachta-Reyhofen said the offer is fair given the poor economic conditions in Europe.
“MAN SE considers the current valuation to be relevant and appropriate,” Pachta-Reyhofen said in a speech yesterday. “The prospects for the MAN group in 2013 have been affected by the decline in economic growth expectations.”
Minority shareholders of German corporations who are eventually forced out after a takeover often sue for more compensation.
Dreier last month won a ruling ordering Bayer AG to pay some former shareholders of Schering AG an extra 46 euros a share, including interest, over the 2006 acquisition. The lawyer said the additional payments will cost Bayer more than 300 million euros, based on 7.2 million Schering shares. Schering shareholders in the 2006 deal had gotten 89.36 euros a share. Bayer has appealed the ruling, arguing the terms and conditions set at the time of the takeover were adequate.
Closer cooperation is crucial to VW’s effort to jump start a stalled seven-year effort to forge Europe’s biggest truckmaker comprising MAN, Sweden’s Scania AB and its own commercial vehicles unit. Slumping demand for trucks in Europe, MAN’s largest sales region, and ill-fated business decisions by the truck manufacturer have added urgency to VW’s efforts.
MAN on Tuesday forecast its return on sales will fall “significantly” this year because of higher charges related to a power-plant deal, “substantial” tax risks and weaker after-sales business for its turbo and diesel unit. In the first quarter, MAN reported an operating loss of 82 million euros. Pachta-Reyhofen said yesterday he saw no reason to spin off the power engineering unit.
“The era of a proud MAN is coming to an end,” Daniela Bergdolt, a representative of the DSW shareholder organization, said in a speech. MAN’s weak results and profit warning were aimed at keeping the company’s valuation low to avoid a higher offer, she said. “You should be ashamed.”
VW has been seeking a heavy-truck alliance since buying an MAN stake in 2006, a move that thwarted MAN’s own effort to take over Scania, which VW partly owned. VW gained a controlling stake in Scania in 2008. MAN and Scania will remain separate brands, Pachta-Reyhofen said.