Far-reaching effects of MAN bid

At a recent board meeting of Scania AB in Stockholm, the directors unanimously decided to reject an offer from the Chairman of the Executive Board of MAN AG, which could have led to a take-over bid of Scania, the Swedish manufacturer of trucks and buses for heavy transport applications, and of industrial and marine engines.

German rival MAN Group was expected to make a formal bid for Scania, whose 2005 sales topped $8.7 billion. Analysts were predicting bids of about $12 billion, with payment in cash and shares in the new company. But Patrik Sjöblom, an analyst with CA Cheuvreux in Stockholm, says MAN could bid as much as $13.6 billion for Scania, or $68 per share, about 18% more than its current $11.5 billion market value. A merger would give the two companies the top spot in the European truck and bus market and give MAN entree into the U.S. market.

Directly in the middle of the action is Investor, the holding company of Sweden’s powerful Wallenberg family. The Wallenbergs have had a stake in Scania since 1916, and Investor currently holds 10.8% of the company’s capital and 19.3% of its voting shares. (Two-tier ownership structures, where some shares have more voting rights than others, are common in Sweden.) Representatives from Investor were set to meet on Sept. 15 with MAN, which is based in Munich and booked 2005 sales of $18.7 billion.

Through their extensive web of holdings, the Wallenbergs control or are large shareholders in the cream of Swedish industry, including telecom equipment giant Ericsson, appliance maker Electrolux, industrial equipment maker ABB, drug maker Astra Zeneca, and SEB, a top Scandinavian bank. Above and beyond Investor’s stake in Scania, the family controls an additional 9.7% of the truck maker’s voting shares and 5.3% of its capital via the Knut and Alice Wallenberg Foundation.

Investor isn’t the only big Scania shareholder with a stake in the deal. Germany’s Volkswagen owns 34% of the voting shares and 18.7% of the capital, so it could profit handsomely from a buyout. But analysts say the German company is more likely to strike a deal with MAN for joint ownership of Scania.

Neither Investor nor Volkswagen will has commented on the bid, but one source close to Investor said the Wallenbergs will want cash only for their Scania stake. To pull off an all-cash deal, MAN would likely have to sell off some of its holdings such as its B&W diesel engine division in Denmark. There is, of course, always the possibility that a bid from MAN will spur competing offers. But a deal with any rival will need European Commission approval. In early 2000, the Commission refused to O.K. a merger between Scania and fellow Swedish truck maker Volvo on antitrust grounds.