Minority Shareholders Walking Away from Volkswagen-Scania Deal

Volkswagen is still confident that their offer for Scania will be completed, but small investors are not inclined to agree to the company's cash offer.

Stockholm-based Aktiespararna said yes to the offer from Volkswagen for its bid for Scania, recommending members accept the cash offer for 200 kronor per Scania share. However, Carl Rosen, CEO of the Shareholder’s Association said the recommendation was made with mixed feelings, and suggested that accepting the offer was just the better of two bad options: accepting or rejecting.

Rosen said in a press release that the current ownership structure of Scania is unsustainable as the principal shareholder interests clearly diverge from the minority. “The bid solves this ownership knot and is financially fair,” he said, despite his reservations. And, he also added that the thought of rejecting the offer and seeing the price fall was not an attractive option.

Volkswagen has offered to buy remaining shares for 200 Swedish kronor ($30.78) per share in a transaction valued at more than $9 billion—a 36% premium over where the stock was trading when the bid was launched in February, the Wall Street Journal has indicated. As a comparison, Scania shares traded at 186.80 kronor, up 0.8%, in Wednesday's session.

The acceptance period of the offer ends on April 25, 2014. And, some minority shareholders, including Investor AB, Fjarde AP-fonden and AMF, have already rejected the offer. In a release, Fjarde AP-fonden (Fourth AP Fund in translation) said that the company, “is aware that there is a risk that Scania’s course in the short term may fall if the offer is withdrawn. Our view is that Sweden's pensioners, Fourth AP Fund's principals, eventually benefit from Scania remaining an independent listed company.”

Earlier this month, an agreement was reached and signed by Volkswagen Aktiengesellschaft, the Swedish trade unions at Scania and Volkswagen’s Global Works Council, securing employment at Scania’s locations, should the offer be completed. Essentially it stipulates the following:

• Production cannot be relocated without the approval of the employee representatives.
• Scania’s head office is and will remain in Södertälje. Research and development will be retained there in full.
• Scania’s employee representatives will be involved in all significant decisions by the Volkswagen Group that affect the company’s commercial vehicles strategy.

While Volkswagen appears to remain confident in the deal, the offer will not go through completion if Volkswagen does not become owner of more than 90% of all shares in Scania.

Image: Wikimedia Commons