Frankfurt: German truck maker MAN SE and Sweden’s Scania are in talks over a possible merger, Scania said on Monday, in a move which could see Volkswagen take full control of both.
Both Scania and MAN said no decision has been reached yet as they reacted to media reports that Volkswagen, which owns key stakes in both companies, is seeking a new plan for its truck operations.
The reports had said Volkswagen was planning to increase its stake in Scania to between 75-80% from nearly 46% currently, with its near 30% stake in MAN going to the Swedish firm.
At Friday’s closing price MAN was worth about €11.86 billion ($16.22 billion) while Scania was valued at nearly 116 billion Swedish crowns ($16.90 billion).
MAN’s shares were up 6.6% at €87.85 by 1146 GMT on Monday, their highest level in 2-1/2 years, while Volkswagen was up 0.85% at €100.95 and Scania was up 1.2% at 147.70 crowns.
Analyst Juergen Pieper at Metzler Equities said a takeover of MAN via Scania made a lot of sense, and Volkswagen could comfortably do so.
“Financially, it’s a very neat solution,” he said.
Volkswagen has a war chest of €19.6 billion and is generating enough cash to take over both MAN and Scania, as Bernstein analyst Max Warburton pointed out at VW’s third-quarter results last month.
Scania said the two companies have been mulling for some time various possible industrial projects that would generate savings in research and development, manufacturing and sourcing.
“This process has shown that a full realisation of potential synergies requires a closer cooperation by combining the two companies, while maintaining the unique brand values of the respective company,” it said.
MAN, which made a failed bid for Scania four years ago, described the talks as “mutually friendly”.
Deutsche Bank analysts said an acquisition of MAN via Scania was likely to be the best option for Volkswagen to resolve the legal structure between its truck holdings.
However, any merger proposal could meet with fierce resistance from labour unions, with IG Metall in Germany already saying they would reject a takeover of MAN via Scania.
Sydbank analyst Morten Imsgard also said integrating MAN with Scania could take some time.
“So from a short-term perspective the deal might not be that good for Scania but in the long term in the competition with the bigger players like Volvo and Daimler I think it’s a way to go for them since they are still quite small compared to the other players.”
Volkswagen currently owns 45.7% of Scania’s capital and holds 71% of the voting rights. MAN meanwhile controls 13.4% of Scania’s capital and has 17.4% of the voting rights.