Bloomberg News

VW Holds Off on MAN SE Nominees Amid EU Antitrust Talks

June 27, 2011

(Updates with closing share price in fifth paragraph, vote results in ninth.)

June 27 (Bloomberg) -- Volkswagen AG, Europe’s biggest car manufacturer, backed off plans to name executives to MAN SE’s supervisory board to help facilitate regulatory clearance to merge the companies’ truckmaking operations with Scania AB.

VW, which is bidding to raise its stake in MAN before combining with Scania, withdrew the nominations of three managers to the truckmaker’s board, the Wolfsburg, Germany-based company said today in a statement. The reversal was prompted by guidance from the European Union’s executive arm during antitrust talks, it said.

VW “takes suggestions from the EU Commission into account” in the interest of completing regulatory proceedings “quickly and smoothly,” the company said in the statement.

The maker of the Golf hatchback triggered a mandatory bid for all of MAN by raising its stake on May 9 to 30.5 percent from 29.9 percent. The tender of 95 euros per common share, started May 31 and expires on June 29. VW controls Scania, a holding it accumulated after helping the Soedertaelje, Sweden- based truckmaker fend off a hostile bid from MAN in 2007.

MAN rose 13 cents, or 0.1 percent, to 93.82 euros in Frankfurt, valuing the company at 13.6 billion euros ($19.4 billion).

‘Vigorous Phase’

MAN, which held its annual shareholders meeting today in its hometown of Munich, has advised investors not to accept VW’s bid, which also includes an offer of 59.90 euros per preferred share, saying the price isn’t fair. At the same time, the truckmaker has said that the tie-up has an “industrial logic,” and Chief Executive Officer Georg Pachta-Reyhofen said today that the three companies are entering a “new, vigorous phase” of cooperation.

“Partnering with powerful players like Scania and VW opens up a whole world of new opportunities,” Pachta-Reyhofen told shareholders. “The next big change might be in store for us, and MAN may be becoming part of a bigger picture.”

VW planned to nominate Chief Executive Officer Martin Winterkorn, Chief Financial Officer Hans Dieter Poetsch and Jochem Heizmann, the carmaker’s commercial-vehicle division chief, to MAN’s board. The three pulled out for now because of the EU’s regulatory advice, Ferdinand Piech, chairman of both VW’s and MAN’s supervisory boards, said today at the meeting.

Alternate Candidates

Instead, shareholders re-elected board members Ulf Berkenhagen, procurement chief at VW’s Audi unit, and Thomas Kremer, legal counselor at ThyssenKrupp AG, and elected Munich- based corporate lawyer Matthias Bruse, MAN said today. Piech retained the chairman post.

“It shows that VW doesn’t want to disrupt the legal process,” said Marc-Rene Tonn, who recommends buying VW stock and has a “hold” recommendation on MAN shares. “The personnel issues will come up again later,” he said, adding that the board setback may not delay the savings sought by VW from the combination.

Tighter control of MAN is part of VW’s strategy geared toward creating a manufacturer that supplies vehicles from subcompacts to heavy trucks to surpass Toyota Motor Corp. as the world’s biggest automaker by 2018. Investors, unimpressed by VW’s about-face on the board appointments, accused Piech of violating corporate governance rules.

Conflict’s ‘Personification’

“Mr. Piech, you are the personification of conflict of interest,” said Harald Petersen of the SdK shareholders group. “For shareholders, the way you go about pursuing your agenda is woebegone.”

MAN, which is forecasting “good performance” in the second quarter, will take steps to “swiftly” realize cost savings with Scania once VW gains approval from antitrust authorities for its integration plans, CEO Pachta-Reyhofen said.

“MAN and Scania could complement their respective product portfolios,” Pachta-Reyhofen said, adding that cooperation with VW may allow for new products in lighter commercial vehicles.

The manufacturer, which also makes diesel engines and turbines, projected sales rising as much as 10 percent this year, driven by a gain of up to 15 percent for the trucks unit. Backed by growth in markets such as Brazil, Russia, India and China, business should continue to recover “soundly and steadily,” MAN said today.

--Editors: Chris Reiter, Kenneth Wong

To contact the reporter on this story: Andreas Cremer in Berlin at acremer@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net


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