MAN bids for Scania, offer rebuffed

By Christiaan Hetzner and Michael Shields

FRANKFURT (Reuters) - German industrial group MAN AG (MANG.DE: unveiled a 9.6 billion euro (6.5 billion pound) cash-and-share offer for Scania AB (SCVb.ST: which the Swedish truckmaker and a key shareholder immediately rejected on Monday.

MAN presented the deal as an avenue for two mid-sized rivals to combine to form Europe's truck-market leader, with a platform for global growth that would give it the economies of scale needed to compete against bigger rivals.

But Scania said its board unanimously rejected the offer at a meeting on Sunday and Investor AB (INVEb.ST: , which holds most of the Swedish Wallenberg family's 29-percent Scania stake, said it "did not reflect the fair value and potential of Scania".

Analysts said MAN may be forced to increase the value of its bid if it really wants to get its targeted 90 percent stake.

"This smells like a higher price," said market analyst Heino Ruland at German brokerage Steubing. "The decisive thing is the rebuff from major shareholder Investor AB."

MAN stock fell nearly 5 percent and was down 3.6 percent at 61.70 euros at 09:19 GMT (10:19 a.m. British time). Scania rose 5.5 percent to 448 crowns.

MAN said it would offer 38.35 euros in cash and 0.151 new MAN shares for each Scania share, valuing Scania at 48 euros, or a little over 440 Swedish crowns, per share at Friday's prices.

"We believe this is the right deal at the right time," MAN Chief Executive Hakan Samuelsson said.

Carmaker Volkswagen (VOWG.DE: Quote, Profile, Research), which owns a third of Scania, said it would make a statement on Tuesday at the latest.

MAN said it had got French carmaker Renault's (RENA.PA: Quote, Profile, Research) 5 percent Scania stake with no strings attached.

SHARE ISSUE, PARTNERS

MAN said it would keep trying to win over Scania shareholders, and insisted it had no plan to change the mix of shares and cash.

"We are confident that ... we will get broad support for our concept in the end," Samuelsson, a Swede and himself a former Scania executive, told analysts in a conference call.

MAN plans to use liquidity on hand plus a credit line to finance the cash part of the offer. Shares needed for the deal would be issued using existing authorised capital.

MAN expects to issue up to 2 billion euros (1.3 billion pounds) of new equity or equity-like capital in a subsequent capital increase. It targets an investment-grade credit rating.

Samuelsson held out prospects for the combined group to cooperate more closely with existing partners Navistar (NAV.N:, Volkswagen, and Toyota Motor Corp (7203.T:) unit Hino Motors (7205.T:) to attain global reach.

"Together we can be much more effective and use our resources together to do something more interesting in (the) very important future markets" China and India, he added.

Analysts have long expected truck makers such as MAN and Scania to use takeovers to gain the scale to compete globally, but the deal's timing was a surprise given a four-year truck boom that has pushed valuations to peaks is starting to wane.

The offer values Scania at 16 times expected 2006 earnings, below the global average for commercial vehicle makers of 18 but a premium to the 11 times for larger rival Volvo AB (VOLVb.ST:).

Based on the average price in the three months to September 11 -- the day before Reuters reported MAN's interest in a deal -- the premium for the offer is 39 percent for Scania A shares and 36 percent for the B shares, MAN said.

The new group would control roughly 28 percent of the European heavy truck market versus just over a quarter for Volvo and a fifth for DaimlerChrysler (DCXGn.DE: ), respectively the global number two and number one.

Volvo, for its part, is being badgered by activist shareholders to buy something or return some of its cash pile to investors. Analysts say Volvo is on the lookout for deals in Asia and eastern Europe, with China a likely target.

MAN expected the acquisition to contribute to earnings in the first year and forecast pro-forma sales of 18.5 billion euros (12.5 billion pounds) and operating profit of 1.4 billion euros (942 million pounds).

It said the combined group would deliver cost synergies of at least 500 million euros (337 million pounds) per year within three years, while expected integration costs would total 150 million euros (101.2 million pounds).

MAN expects to complete the deal before year-end.

(Additional reporting by Patrick Lannin and Victoria Klesty in Stockholm and Hakan Ersen in Frankfurt)

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