|
Volvo gets Scania for $7.5B
|
 |
August 6, 1999: 2:11 p.m. ET
Combined Swedish truck firm will be No. 2 in world, challenge Daimler
|
LONDON (CNNfn) - Volvo won the acrimonious battle for control of fellow Swedish truck maker Scania Friday after agreeing to acquire a majority stake from its biggest holder, AB Investor, and offering to buy all the remaining shares for a total of 60.7 billion Swedish kronor ($7.46 billion).
A combination of Volvo and Scania will create the world's second-largest truck and bus maker, with pro forma sales in 1998 of more than 160 billion kronor ($19.7 billion).
An industry source said Volvo faces a tough road with European Union regulators to get clearance for its proposed acquisition of Scania.
"I would expect a merger between Volvo and Scania to have very broad implications, not only in Europe, but also in the United States," said a Brussels-based industry representative specializing in European Union affairs.
Nobody was available for comment at the European Commission, the executive body of the European Union.
Volvo spokesman Stefan Lorentson declined to say how the companies would address the issue of competition when dealing with the Commission, whose task is to prevent the creation or strengthening of dominant positions in the 15-nation bloc.
A Nobel Prize
Analysts said Volvo is overpaying for the stock, but will generate significant efficiency from combining the operations. "If they offered a Nobel prize for commercial logic, this would win," said Peter Schmidt, head of consultant Automotive Industry Data.
Volvo, which sold its car operation to Ford (F) in January for $6.45 billion, had built up a stake of more than 20 percent in Scania over the past nine months.
However, its takeover ambitions were thwarted by AB Investor, which finally agreed to sell its stake after watching Scania's share price soar.
Investor, the holding company for the Wallenberg family's industrial interests, has agreed to invest some of the cash it receives in Volvo stock. Investor President and CEO Marcus Wallenberg said, "Our faith in the agreement is demonstrated through our use of 40 percent of the payment we receive to acquire shares in Volvo."
Investor said it will control 13 percent of Volvo's voting shares after the sale.
Volvo will own nearly 70 percent of Scania's voting rights after securing the Investor stake. Volvo will pay 315 kronor a share cash for 60 percent of the stake, and cash or some newly issued Volvo shares for the other 40 percent. Scania traded at 244 kronor before the announcement.
Volvo is offering 315 kronor per share in cash or new stock for the remaining outstanding Scania shares.
Scania shares surged 25 percent to 305 kronor in Stockholm Friday while Volvo shed 2.5 kronor to 241.5.
"Free of speculation"
"It is good that our two largest owners have now reached an agreement and that we are free of continued speculation regarding Scania's future," Scania President Leif Ostling said.
Schmidt said the enlarged Swedish firm could be expected to launch an attack on DaimlerChrysler's lead in the North American heavy truck market -- the world's largest -- which could allow it to overtake DaimlerChrysler's global lead in market share.
Volvo and Scania together already lead the European market with a share of about 30 percent compared with DaimlerChrysler's 21 percent, Schmidt said.
"I will place heavy emphasis on ensuring that each brand and company is developed in a spirit of cooperation," Volvo CEO Leif Johannsson said.
The German firm's truck and bus operation has only recently turned a profit while both the Swedish firms are profitable.
Efficiency benefits from the deal are expected to reach 5 billion kronor annually, kicking in fully after three years. Volvo plans to take a charge of about 2 billion crowns over the next two years. 
--from staff and wire reports.
|
|
|
|
|
|
Volvo
Scania
|
Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney
|
|
|
|
 |
|
