MAN buys Scania stock for merger leverage

MAN AG, Europe's third-largest truckmaker, plans to accumulate at least a 10% stake in Scania AB to gain leverage in merger negotiations, said two people with direct knowledge of MAN's strategy. MAN, based in Munich, is buying shares of its Swedish rival at prices above the 442 kronor offered September 18 in a hostile bid valued at €9.6 billion ($12 billion), said the people, who declined to be identified because MAN hasn't yet announced the purchases. MAN agreed on Tuesday to withdraw the hostile bid and begin negotiations with Scania and its two biggest shareholders, Volkswagen AG and Investor AB, all of whom rejected the first bid, providing the talks have the „clear aim” of combining the two truckmakers.

Volkswagen CEO Bernd Pischetsrieder last week had his company acquire 15.1% of MAN in a „strategic” move giving the carmaker bargaining power. „Volkswagen will probably view this with disappointment and Pischetsrieder may well decide to pull the rug from MAN and make a counter bid because of this hostile action,” said Stephen Pope, an analyst at Cantor Fitzgerald in London. „There are going to be a few more twists and turns in this saga before it's over.” Shares of Scania fell 4 kronor, or 0.9%, to 428.5 kronor yesterday in Stockholm. The shares are up 49% so far this year. Volkswagen fell 26 cents to €70.03 while MAN fell 71 cents to €67.34.

Scania late on Tuesday again rejected the MAN bid as „it substantially undervalues Scania.” The Sodertalje, Sweden-based truckmaker said that according to reports in the market, MAN was „an aggressive buyer” of Scania's high-voting A-shares while proposing friendly talks between the two sides. The company also said Q3 operating profit will exceed „market expectations” by nearly 25%. MAN CEO Hakan Samuelsson, a 55-year-old Swede who once was head of production at Scania, wants to take over his former employer and challenge DaimlerChrysler AG and Volvo AB, the region's largest truckmakers. A combination of Scania and Munich-based MAN would rank first in European sales and third worldwide. Pischetsrieder said October 9 on a conference call with analysts that the carmaker is interested in combining its Brazilian heavy-truck division, which has more than €1 billion in annual sales, with MAN and Scania. He said Volkswagen's financial services unit and light-truck units would benefit from the combination. MAN said September 18 that it had agreed to buy 5.7 million Scania shares from Renault SA, representing 2.85% of the shares and 5.18% of votes.

Volkswagen, Europe's largest carmaker, holds 34% of Scania's voting rights and 18.7% of the equity. Stockholm-based Investor AB, controlled by Sweden's Wallenberg family, is Scania's second-biggest shareholder with 19.3% of the voting rights and 10.8% of the capital. Samuelsson joined MAN in 2000 to run the commercial-vehicles division. He spent 23 years at Scania before that, ending his tenure there as the research and production chief. Since taking over MAN in January 2005, he has sold divisions to raise cash for acquisitions. MAN sold 27,534 heavy commercial vehicles and buses in Western Europe this year through August, giving it a 14.8% share of the market, according to the European Automobile Manufacturers Association Web site. Scania sold 23,642 heavy trucks and buses, and was third in the segment with market share of 12.7%, behind Volvo. (Bloomberg)