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Volkswagen Raises Stake in Truck Maker MAN Above 75%

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06/05/2012 | 05:05pm CEST

-VW keeps all options open for future truck alliance between MAN and Scania

-Power engineering unit to remain part of MAN

-MAN shares jump 8%

-Fitch says Volkswagen's diversification underpins decision to change ratings outlook to positive

(Adds analyst comment in 7th and 8th paragraphs, background and share price data)

  By Christoph Rauwald 

FRANKFURT--Volkswagen AG (>> Volkswagen AG) Tuesday tightened its grip on German truck maker and engineering firm MAN SE (>> MAN AG) by lifting its voting stake above 75%, marking the next step towards forging a truck alliance with Sweden's Scania AB (SCV-A.SK) to take on global market leaders Daimler AG (>> Daimler AG) and Volvo AB (VOLV-B.SK).

"This marks a further important milestone for achieving our joint goals in the commercial vehicles business," Volkswagen Chief Executive Martin Winterkorn said in a statement.

Volkswagen said it will be "putting every effort into leveraging synergies and substantial growth potential" in the group's commercial vehicles business.

News of Volkswagen's increased stake in MAN follows the announcement of a wide-ranging management reshuffle at the automotive group including changes at its truck-making units. Leif Ostling, the chief executive of VW's Swedish truck brand, Scania AB, will join Volkswagen's management board and succeed Jochem Heizmann as truck chief. Mr. Heizmann will take on a new management-board post responsible for Volkswagen's Chinese operations.

The truck business has emerged as a second pillar for Europe's largest car maker after it acquired majority stakes in MAN and Scania in recent years.

Volkswagen's diversfication of its portfolio has included Porsche sports cars and most recently Ducati motor bikes as well as a big sales push in China and more recently the U.S..

The group's business profile is "at the top end of the sector," said Emmanuel Bulle, an analyst at Fitch Ratings. The agency has raised its credit outlook for Volkswagen to positive from stable.

"Volkswagen's substantial cash pile and free cash flow generation provide the group with significant headroom in its ratings and should enable it to absorb further expected investment without impairing key credit metrics," Mr Bulle said.

Mr. Winterkorn said MAN will "retain its operational autonomy" while its power-engineering unit, which produces large diesel engines and other machinery, would remain "a solid part" of the Munich-based firm.

Under German stock market rules, investors have to disclose if they cross the 75% stake threshold. Volkswagen so far held a stake of just below 75% in MAN.

Volkswagen Chief Financial Officer Hans-Dieter Poetsch reiterated Saturday that the company is keeping all options open for the future structure of its truck alliance. This includes a so-called domination agreement under German stock market rules, which would give Volkswagen complete access to MAN's cash flow. A domination agreement requires a 75% voting majority at shareholder meetings.

"MAN and Scania can raise their profitability further through closer cooperation," Volkswagen said, adding that all shareholders "will benefit from the associated growth in value."

Mr. Poetsch said cost savings, derived in part from closer cooperation in purchasing and research and development, could exceed the initial target of 200 million euros a year.

MAN shares were 8.2% at 84.33 euros around 1416 GMT, making it the biggest gainer in the DAX30 bluechip index, which was up 0.1%. Volkswagen's preference stock, its most actively traded securities, were up 0.4%. Shares in Scania were 0.4% higher at 116.70 Swedish kronor.

-Write to Christoph Rauwald at [email protected]

Stocks mentioned in the article : Volkswagen AG, MAN AG, Daimler AG
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Financials (€)
Sales 2017 229 B
EBIT 2017 16 334 M
Net income 2017 11 737 M
Debt 2017 21 319 M
Yield 2017 2,28%
P/E ratio 2017 6,20
P/E ratio 2018 5,74
EV / Sales 2017 0,42x
EV / Sales 2018 0,40x
Capitalization 73 802 M
Duration : Period :
Volkswagen Technical Analysis Chart | VOW3 | DE0007664039 | 4-Traders
Technical analysis trends VOLKSWAGEN
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus OUTPERFORM
Number of Analysts 32
Average target price 164 €
Spread / Average Target 14%
EPS Revisions
Matthias Müller Chief Executive Officer
Hans Dieter Pötsch Chairman-Supervisory Board
Martin Hofmann Head-Group Information Technology
Peter Mosch Member-Supervisory Board
Bernd Osterloh Member-Supervisory Board
Sector and Competitors
1st jan.Capitalization (M$)
VOLKSWAGEN8.10%86 865
DAIMLER-3.97%86 104
HONDA MOTOR CO LTD-0.29%54 888