Daimler, Rolls-Royce make $4.4 bn bid for Tognum

Daimler and Rolls-Royce Group made a takeover bid for Tognum valuing the German manufacturer at ¤3.2 billion ($4.4 billion) as they target growing demand for heavy engines in emerging economies.

The stock traded as much as 4.5 per cent above the offer price of ¤24 per share after Friedrichshafen-based Tognum said the companies haven’t reached agreement on price. The offer is 30 per cent above the March 4 close, the last trading day before the companies publicly expressed their interest.

Gaining control of Tognum, which Daimler used to own, would give the two companies the world’s second-largest maker of high- speed diesel engines for the marine, energy and defence industries after Caterpillar Inc. The deal would represent Daimler’s biggest purchase since buying a 34 per cent stake in Mitsubishi Motors in 2000, according to Bloomberg data.

 

“The offer represents a reasonable premium,” said Marc- Rene Tonn, an analyst with M M Warburg in Hamburg. “Given Daimler’s large cash reserve, it needed to pose the question about what to do with it. It’s an interesting expansion.”

Tognum rose to as high as ¤25.08 and was up 6.8 per cent to ¤24.80 as of 2.47 pm in Frankfurt trading. Daimler added 1.6 per cent to ¤49.92, while Rolls-Royce shares gained 2.7 per cent to 616.5 pence in London.

Tognum welcomed the potential cooperation with Daimler and Rolls-Royce, even with an agreement on price outstanding. The companies agreed not to cut jobs at Tognum and retain existing facilities, including the headquarters in Friedrichshafen.

The bid is conditional on more than 50 per cent of the shares being tendered. Daimler CEO Dieter Zetsche said he was “optimistic” of reaching that target, even as investors lobbied for a higher price. Delta Lloyd Asset Management, which owns 1.4 per cent of Tognum, doesn’t plan to sell its shares at the current offer price.

The offer for Tognum is “highly attractive,” Daimler spokesman Florian Martens said by telephone. A Rolls-Royce spokesman declined to comment beyond today’s statement.