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Volkswagen AG makes $9.2B offer for remaining shares of Scania; common toolkit strategy for commercial vehicles

Volkswagen AG is making a voluntary tender offer worth approximately €6.7 billion (~US$9.2 billion) for all remaining shares (298,910,903) of Scania. Volkswagen has been invested in Scania since 2000 and today indirectly and directly holds a total of 89.2% of the voting rights and 62.6% of the capital of the Swedish commercial vehicles company. The offers works out to approximately €22.26 per share—a premium of 57.0% per Scania A share and 53.3% per Scania B share on the volume-weighted average prices of Scania’s shares in the 90-day period up to 21 February.

Under the current ownership structure it is not possible to leverage the full potential of closer cooperation at an operational level between Volkswagen and Scania, as well as between MAN and Scania, due to the legal restrictions in place to protect the minority shareholders in Scania (‘at arm's length' principle).

The now planned full acquisition of Scania aims to remove the current obstacles to cooperation and enable key joint projects to be implemented more rapidly, thereby achieving additional growth opportunities and synergies.

With its premium products, its strong market position and its technological expertise, Scania is a core element of the integrated commercial vehicles group that we intend to accomplish under the umbrella of the Volkswagen Group. Our offer is designed to create a sustainable and clear ownership structure for Scania. This is a key step towards being able to fully exploit the advantages offered by the integrated commercial vehicles group for everyone involved. Our offer reflects this high strategic value. We are convinced that it is very attractive for Scania’s shareholders and will create long-term value for Volkswagen.

—Prof. Dr. Martin Winterkorn, Chairman of the Board of Management of Volkswagen AG

Above and beyond previously communicated synergies of more than €200 million (US$275 million) that will be achieved by the end of 2014, on average Volkswagen expects additional long-term synergy potential of at least €650 million (US$893 million) operating profit per year within the integrated commercial vehicles group. However, in light of the long product lifecycles in the commercial vehicles industry, it will be 10 to 15 years before this potential can be fully leveraged, the company noted

The plan to fully integrate Scania into the Volkswagen Group follows a compelling industrial logic. It will significantly improve the capabilities, efficiency and flexibility of the commercial vehicles group comprising Scania, MAN and Volkswagen Commercial Vehicles, for example by implementing a common toolkit strategy similar to the one used in our passenger cars.

—Dr. Leif Östling, member of the Board of Management of Volkswagen AG responsible for Commercial Vehicles

This opens up new opportunities, such as future Group-wide responsibility for certain systems and components, or the increased use of the Volkswagen Group's global presence.

There are no plans for structural changes at Scania, in particular in regard to its employees and the production locations and development centers.

The acceptance period for the offer to Scania’s shareholders is expected to start on 17 March 2014 and end on 25 April 2014. The offer will be subject to, among others, the condition that Volkswagen through the offer becomes the owner of more than 90% of the total number of shares in Scania. After exceeding the threshold of 90% Volkswagen will perform a squeeze-out and promote delisting of the Scania shares from the stock exchange.

Volkswagen will use the Automotive Division’s existing net liquidity to pay for the shares tendered by shareholders under the offer. Volkswagen will achieve partial refinancing through the issuance of new preference shares in the amount of up to €2 billion using the existing authorized capital as well as issue hybrid capital.



If this purchase goes through, WV may very well become number one in 2015?

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