VW Said to Consider Raising Scania Stake for Truck Effort

Volkswagen AG is considering raising its majority stake in Swedish truckmaker Scania AB to deepen cooperation with the carmaker’s two other commercial-vehicles units, two people familiar with the matter said.

VW currently has no firm plan and a purchase isn’t imminent, said the people, who asked not to be identified discussing private deliberations. Buying Scania’s remaining shares would cost 41.8 billion kronor ($6.4 billion) at yesterday’s closing price. Scania today gained the most in more than nine months.

VW, the world’s second-largest carmaker, is looking to jump-start a stalled seven-year effort to more closely align Scania, Munich-based truck producer MAN SE, which it also controls, and its own commercial-vehicles unit. VW faces resistance to that plan from Scania’s minority shareholders, who yesterday asked for an independent auditor to examine whether ownership of the Soedertaelje-based company by the German carmaker and MAN poses a conflict of interest.

“Strategically it would make sense for VW to increase its stake in Scania at some point to have more control over the company,” Sascha Gommel, a Frankfurt-based analyst at Commerzbank AG, said by phone. “The planned short-term cost synergies seem to materialize, but the question is how this will work in the long run.”

Shares Climb

Scania climbed as much as 9 kronor, or 7 percent, to 139 kronor, the biggest gain since April 23, and was up 6.3 percent as of 11:04 a.m. in Stockholm trading. The stock has gained 4.2 percent in the last year, valuing the Swedish truckmaker at 109 billion kronor. VW was up 2.1 percent in Frankfurt.

VW could finance a purchase of Scania’s remaining shares out of its own coffers. The automaker’s net liquidity at the end of the third quarter gained 81 percent to 16.6 billion euros ($22.4 billion) after VW raised 3.7 billion euros last year by selling bonds convertible to preferred shares.

“Volkswagen could definitively afford to buy the rest of Scania,” said Tim Schuldt, a Frankfurt-based analyst with Equinet AG. “The question is how fast they want to proceed and which approach they are taking. The money is there.”

VW is targeting combined annual savings of 200 million euros from cooperation between the three commercial-vehicles divisions. The automaker already has a domination agreement with MAN, which means the two can legally work more closely. That leaves Scania as the last of the three units preventing a deeper integration.

MAN Holding

VW directly controls almost 46 percent of Scania’s capital and 71 percent of the votes. The carmaker started buying stock in the Swedish manufacturer in 2000, and acquired majority voting control in March 2008. MAN owns another 13 percent of Scania’s equity and 17 percent of the votes.

VW has also accumulated a 75 percent stake in MAN since 2006, when it first purchased a holding to thwart the German truckmaker’s effort to take over Scania. VW, as part of the profit and loss transfer agreement reached last year with MAN, is required by law to offer to buy out the German truckmaker’s remaining owners. VW is facing lawsuits from dozens of MAN stakeholders who want a higher price for their shares.

An investor wanting to buy the remaining shares in a Swedish company in which it already has a holding must make a public offer to all minority owners who can then accept or reject it, Rolf Skog, head of the Swedish Securities Council, said by phone today. To pursue a squeeze-out, the majority holder first needs 90 percent of the stock, he said.

Trucks Chief

VW is looking to hire former Daimler AG board member Andreas Renschler to succeed 68-year-old trucks chief Leif Oestling and move forward the cooperation, people familiar with the matter said last week. Oestling, whose contract expires next year, spent decades running Scania before taking charge of VW’s commercial-vehicles operations.

The purchase of the remaining Scania shares might be pursued once VW has a new executive to run trucks, Gommel said. A squeeze-out of minority shareholders seems unlikely under Oestling due to his long career at Scania, he said.

Investors object to Scania’s plan to cut its dividend, the abolition of a board-nominating committee and VW’s reported intervention in the truckmaker’s bid for a military order in Scandinavia, the Swedish Shareholders’ Association said yesterday. The association will propose at the annual meeting that an outside examiner look into ties among the companies and “consequences for the shareholders,” it said.

Double Ownership

“One can only see the reduced dividend as a declaration of war against the minority shareholders,” as there’s no financial justification for the cutback, Carl Rosen, the head of the association, said in the statement. “Double” ownership by VW in both Scania and MAN “forces a competitor into the heart of Scania, which risks emptying Scania of value, to the detriment of other shareholders.”

Scania reported a 7 percent drop in net income to 6.19 billion kronor in 2013. Operating profit rose 2 percent to 8.46 billion kronor, the company said on Jan. 29. The board of directors proposed reducing the dividend by 16 percent to 4 kronor a share from 4.75 kronor.

(Updates with analyst’s comment in seventh paragraph, Swedish takeover law details in 11th.)
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