Scania rejects MAN''s $12 billion bid

18 September 2006

Mumbai: Swedish truckmaker Scania AB has rejected a €9.6 billion ($12.18 billion) cash-and-share take-over bid by German group MAN AG. The Scania board rejected the offer while Investor AB, which holds a major share of the Swedish Wallenberg family's 29-per cent Scania stake, said the offer "did not reflect the fair value and potential of Scania".

A deal to merge the two mid-sized rivals would have helped create a truck-market major with economies of scale and wider growth potential both within and outside Europe. A MAN-Scania combine could control roughly 28 per cent of the European heavy truck market compared to Volvo's share of just over 25 per cent and DaimlerChrysler's share of 20 per cent.

MAN, which is aiming at a 90-per cent stake in Scania, may have to increase its offer if it really wants to acquire a stake in Scania, analysts said. MAN's offer of €38.35 in cash and 0.151 new MAN shares for each Scania share values Scania at €48 (around 440 Swedish crowns) - 16 times its expected 2006 earnings, below the global average for commercial vehicle makers of 18 but at a premium to the larger rival Volvo AB. MAN said the premium for the offer is 39 per cent for Scania A shares and 36 per cent for the B shares based on the average price in the three months to September 11.

MAN chief executive Hakan Samuelsson, himself a former Scania executive, said, "We are confident that ... we will get broad support for our concept in the end." MAN said the combined group would deliver cost synergies of at least €500 million per year within three years, while expected integration costs would total €150 million. It expects the acquisition to push sales to €18.5 billion with operating profit of €1.4 billion in the first year itself.

Scania, the world's largest manufacturer of multi-axle trucks, is eyeing acquisitions and tie-ups in Asia and has recently entered into a deal with India's Larsen & Toubro for distribution of its multi-axle trucks.

Volvo is also on the lookout for deals in Asia, Eastern Europe and China. Toyota group company Hino, Volvo and Scania together have about 82-per cent market share in this segment. Munich-based MAN AG (formerly called Maschinenfabrik Augsburg-Nürnberg AG) is mostly known as a manufacturer of buses and trucks though the group is primarily involved in engineering activities. MAN specialises in commercial vehicles, diesel engines, turbomachines and industrial services.