German carmaker Volkswagen formally launched its bid for MAN on Tuesday, in a move toward creating Europe's biggest truckmaker.
VW's chairman Ferdinand Piech has long been itching to combine MAN and Sweden's Scania to take on the world's biggest truck maker, Daimler, and number two Volvo, but has been hampered by anti-trust issues and resistance from Scania.
VW aims first to raise its stake in MAN to 35-40 percent of voting rights from just over 30 percent now, which is just enough to get regulatory approval for closer cooperation between MAN and Scania without buying the whole company.
VW made a deliberately low offer of 95 euros per ordinary share for MAN on Tuesday, 1.8 percent below the current market value of 96.69 euros per share.
Under German takeover rules if few investors accept the mandatory offer, which values MAN at about 13.8 billion euros, VW can then go on to gradually buy up shares in the market.
Eventually, VW envisages having a combined trucks group which saves about 400 million euros of costs per year, mainly by bundling procurement.
The remaining business activities of Volkswagen Group and particularly Scania will not be affected by realizing these synergies, Volkswagen said in the offer document.
MAN said it saw industrial logic and potential savings in a deal with Volkswagen, adding it would further comment on the offer within two weeks.
CASH TO SPEND
VW's offer for MAN follows a similar tactic used by Spanish construction group ACS in its bid for German peer Hochtief and by U.S. construction equipment maker Terex in its bid for Germany's Demag Cranes, where the aim is to build a stake without having to buy the whole company.
It will help Volkswagen, which has a war chest of almost 20 billion euros, keep several balls in the air as it also works toward folding sports car maker Porsche into its business and expands in both China and the United States.
VW, which is being advised on the deal by Credit Suisse, is making its offer five years after MAN tried and failed to take over Scania, leaving relations frosty.
Since then the two companies have struggled to progress in talks under VW's guidance. Last month's 4.9 billion euro rights issue of Porsche SE, VW's biggest shareholder, removed a stumbling block in VW's ability to shoulder takeovers.
(Additional reporting by Andreas Kroener; Editing by Greg Mahlich)