Volkswagen has no serious reason to top up its bid for the Scania shares it does not already own. The 53 per cent premium it already offered amounts to a full price, considering that expected synergies will only materialise in the distant future. Yet, Scania's minority shareholders may still have a chance to get an even better deal.
Volkswagen is determined to build a global truck empire, and the high-margin Swedish company is a key part of the strategy. In pursuit of that vision, the German carmaker may fall hostage to the oversized egos of Chairman Ferdinand Piech and Chief Executive Martin Winterkorn. Both want to create a global "mobility enterprise," making everything from motorbikes to heavy goods vehicles. There is little industrial logic to this idea. As Daimler's experience has shown, the benefits from making both passenger cars and trucks are limited at best.
Yet, Volkswagen still presses on. In 2013, it secured full control over German truckmaker MAN. Closer integration with Scania, of which it currently owns 62.8 per cent, is the next step. Volkswagen wants the two to share research and development, as well as parts, across its truck brands, on the model of what is done in the group's passenger car divisions. For that it needs to totally control the Swedish company. The annual cost synergies are expected to be euro 650 million, which will only materialise over 10 to 15 years due to long product cycles. Volkswagen's overall premium of euro 2.3 billion implies that 85 per cent of the taxed, capitalised and discounted synergies would be handed over to Scania's shareholders. Volkswagen has to keep some synergies for itself - many unexpected events can happen over 15 years. The notion that standalone Scania's shares may top the current offer price in the near future is wishful thinking. Volkswagen's existing stake renders a competing offer implausible, and demand for trucks is patchy in Europe. Based on Starmine's 2016 Ebit forecasts, Volkswagen's offer values Scania at a 43 per cent premium to rival Volvo - and a 24 per cent premium to the wider European machinery sector.
Volkwagen's grandiose truckmaking vision hasn't left it with the option of letting the bid collapse. So, it may be that Scania's petulant minority shareholders could succeed in arm-twisting the Germans.
