European market poised for shake-up

Feb. 5, 2009
The European truck market might be in for a small upheaval amid varied reports that Porsche may be reluctantly entering the market while Sweden’s Scania and Germany’s MAN might consolidate into a truck OEM powerhouse

The European truck market might be in for a small upheaval amid varied reports that Porsche may be reluctantly entering the market while Sweden’s Scania and Germany’s MAN might consolidate into a truck OEM powerhouse.

German weekly Euro am Sonntag reported last week that MAN has upped its stake in Scania to over 16% while Financial Times is reporting the number is 20%. MAN attempted a hostile takeover of Scania early last year, offering approximately $13.5 billion. Scania’s board of directors rejected the offer, but the two companies have continued talking about a possible merger, which would create the largest truck maker in Europe, and would include the truck business of Volkswagen, which is the primary owner of both companies, as well.

Following the takeover bid, Volkswagen ended up buying 69% of Scania for $4 billion in March of 2008. Now, Porsche Automobil Holdings SE has raised its stake in Volkswagen to 50.76%, triggering an interesting regulatory situation.

According to Swedish regulatory agencies, Porsche, now the controlling interest in Volkswagen, was required to make a mandatory bid for all outstanding shares of Scania, which it did, meeting the minimum share price required with an offer of SKr67.10 for a total bid of $3.6 billion. On Tuesday, the Scania board urged shareholders to reject the bid.

“Whilst recognizing current financial market volatility, the Board believes that the offer does not reflect the long-term value of Scania,” it said, and stated that “Scania is a company with a strong, well-positioned business with best-in-class profitability and excellent long-term prospects in heavy vehicles and services.”

The board’s recommendation is backed by analysts Morgan Stanley and Deutsche Bank, both of whom are of the opinion that the offer is “inadequate from a financial point of view to the holders of the A shares and B shares.”

On Tuesday, Scania said truck orders fell 98% and its three-month pretax profit ending in December fell nearly 50% from 2007 to $206 million for the period. “Transport companies had considerable difficulties obtaining investment financing and business loans,” Scania said in a release. “Together with lower economic activity, this led to postponement of both orders and deliveries of trucks ordered earlier.”

Porsche, though, according to some analysts, may end up with a larger stake in Scania after the share price fell below the mandatory bid this week, setting up a possible trigger for shareholders to tender their shares to maximize value. Porsche, for its part, has said it has no interest in running Scania and would sell the stake to Volkswagen.

About the Author

Brian Straight | Managing Editor

Brian joined Fleet Owner in May 2008 after spending nearly 14 years as sports editor and then managing editor of several daily newspapers.  He and his staff  won more than two dozen major writing and editing awards. Responsible for editing, editorial production functions and deadlines.

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