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Swede and sour

21st September 2006
Page 22
Page 22, 21st September 2006 — Swede and sour
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German truck manufacturer MAN has finally con firmed the long-standing rumours and announced a bid for its Swedish rival Scania. Dylan Gray reports.

On Wednesday 13 September, MAN confirmed weeks of speculation when it confirmed that it was interested in taking over Scania. A spokesman reported: "MAN notes the recent media speculation concerning a possible offer by MAN for Scania and the statement made by Scania last night.

"MAN believes that the rationale behind combining MAN and Scania is compelling and confirms its interest in such a combination. Together MAN and Scania would become Europe's leading truck business, creating a platform for profitable growth."

In Europe, at least, a combined Swedish-German firm would be ahead of Volvo/Renault and DaimlerChrysler with sales predicted at around 120,000 trucks and 13,000 buses a year, and employing over 80,000 people.

MAN is keeping its cards close to its chest regarding the size of the offer, but chief executive Hakan Samuelsson has repeatedly stressed that it will not to be a hostile take-over — it will only go ahead with the agreement of Scania's board.

MAN has had a long-standing ambition to bulk up its core truck business — Samuelsson told the Financial Times that MAN needs to triple its truck sales to match current market leaders. But in the past it has said that this growth would come from within, so the Scania link marks a change of policy. Speculation that Scania would become a target for acquisition was fuelled by Samuelsson's connections with the Swedish firm; he used to be its head of production and development.

Talking to Volkswagen

MAN has also approached Volkswagen (Scania's largest shareholder at 34%) about a deal which could also involve the car maker's Brazilian heavy truck business. VW has yet to comment on this, but with MAN's interest in Scania confirmed, it seems the deal has been given the green light.

MAN is believed to be offering a mixture of cash and shares, allowing VW to take a stake in the group. Also involved is the Wallenberg family, which own around 19% of Scania shares.

According to the Swedish newspaper Dagens Industri, the Wallenberg family's investor group has accepted MAN'S offer to sell its shares. Earlier this year MAN had considered buying its US joint e n ture partner Navistar, but had to abandon the idea after accounting issues were revealed at the US firm.

Samuelsson once hinted that a takeover of a major CV manufacturer was conceivable. He said that for MAN such an acquisition would present no financial problem following the sale of its printing machine division, MAN Roland.

However, some pundits are critical about the timing of the planned take-over. Industry observers assumed that any purchases would only go ahead during a downturn in the CV industry. But following a four-year boom no one is predicting a downturn in the immediate future.

Both firms make heavies

Apart from financial issues, there is also the fact that both companies are biased towards the heavy tractor sector, which is a notoriously volatile market.

They have similar strengths and weaknesses, as well as a similar product development philosophy. But while MAN IS generally seen as a 'horizontal' company, outsourcing much of its componentry, Scania is more of a 'vertical' company; and many questions will be asked about the ease of merging the two. Potential problems were reflected in the short-lived component swap deal that fell apart earlier in the year.

With MAN itself a take-over target of various larger manufacturers. the Scania deal might be a simple case of expanding to avoid being snapped up.

There's also the small hurdle of the European Commission to overcome. It could frown on one player dominating the market and scratch the deal, as it did with Volvo's takeover of Scania in 2000.

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Organisations: European Commission

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