Volvo mounts a bid to snap up Scania
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by Toby Clark • Speculation is mounting over the future of Scania following Swedish rival Volvo's announcement last week that it had taken a stake in the company.
Volvo surprised everybody at the Brussels Commercial Vehicle Show on Friday (15 January) by announcing that it had taken a 12.85% stake in Scania, at a cost of around £400m. The move has been seen as the first step in a hostile take-over bid.
Conflicting reports are emerging over Scania's intentions. Some reports say it wants to maintain its independence; others claim it is already in partnership talks with companies other than Volvo.
Volvo's chief executive officer, Leif Johansson, was quite open about his intentions, announcing at the show: "Our analyses of different alternatives show that Scania is a very good alternative for Volvo. ..it is our ambition to create a strong combination with potential for profitable growth—and I underline that, profitable. It is not just a cost-cutting exercise." Volvo emphasised that a combination of the two firms would create "Europe's largest and the world's second-largest manufacturer of heavy trucks and buses. A manufacturer with strong brands, significant development resources and large volumes, particularly in the critical diesel engine area".
Most surprised of all was Scania's management team, which insisted: "No advance negotiations regarding a merger have been conducted with Scania's management." Scania's largest shareholder, Investor, was not keen either—Volvo bought its Scania shares elsewhere— though Investor's chief executive admitted that he had had talks with Volvo.
The deal could be designed to forestall a take-over of Volvo by another manufacturer; possibly Iveco's parent company Fiat. Volvo could sell its car division to help fund the Scania purchase and concentrate on the truck market. But other manufacturers are known to be interested in Scania.
Volkswagen, for example, sees Scania as a good "fit" with its own CV operation, and Renault is seen as another possible buyer. Scania remains profitable, and responded to Volvo's move by announcing an 18% increase in its operating income last year, with a 6% increase in annual vehicle sales.