Creating a European Giant

During the last four years there has been speculation, talk, and even hostile takeover attempts by both MAN and Scania in a bid to acquire each other. Now it seems that much of this talk and hostility is coming to an end thanks to VW and its Chairman Ferdinand Piech.
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Source: Di.se

Takeover bid for MAN

On Monday of this week VW increased its share in MAN from 29.9 percent to 30.47 percent, thus forcing the company, in accordance with German law, to make a mandatory bid for the entire company. VW is offering 95 euros for common shares and 60 euros for preferred shares, which was under the price the stock was trading for the previous week at 96.52 euros. Experts do not expect that investors will actually accept the bid, which is in line with what VW intended, since many believe that the small increase over 30 percent was just a probe to see if regulatory authorities would approve a deal. What many expect is that VW is going to increase their stake to 35-40 percent, thus creating a stable majority for the stakeholder meetings. It is expected that they would need to spend 1.5 billion to acquire the necessary shares.


Failed merger

In February the last merger talks failed mainly due to VW (major stakeholder in both firms) stating that MAN had to sort out its legal issues before talks could continue. What VW was referring to was the corruption accusation against MAN’s previously-owned subsidiary Ferrostaal. Ferrostaal was sold to International Petroleum Investment Company (IPIC) in 2008, but MAN decided to keep a minority stake of 30 percent that could be sold off at a later stage. They are now in a dispute with IPIC owners over potential legal charges and the sale of their minority post.


Creation of a market leader

VW CEO Ferdinand Piech 
Source: abendblatt.de

Piech wants to create the largest European heavy truck manufacturer (Scania and MANs combined market share: 30 percent), and stated that the firms could potentially save one billion euros annually in this fusion. Scania’s CEO, Leif Östling, who has lead the Swedish company for the last 21 years, has previously been hesitant to agree to any kind of merger with MAN, reasoning that merging two companies together often means a loss in overall market share as the organizations focus on blending their cultures instead of beating competitors.  In my opinion, what has changed Östlings view is that instead of threatening him with a hostile takeover, Piech instead is offering to sit down and talk. With the increased position in MAN that VW is expected to take, they are now in the position to dictate the conditions between the companies better than before. Thus, a merger looks more close at hand than ever before.