FRANKFURT German carmaker Volkswagen (VOWG_p.DE) pushed ahead with a plan to combine its MAN (MANG.DE) and Scania SCVb.ST truckmaking affiliates by making a cash bid to increase its stake in MAN.
VW chairman Ferdinand Piech is itching to create Europe's biggest truckmaker to compete better with world leader Daimler (DAIGn.DE) and number two Volvo (VOLVb.ST), but he has been hampered by anti-trust issues and resistance from Scania.
"Building a strong commercial vehicles business is a cornerstone of our strategy," Volkswagen finance chief Hans Dieter Poetsch said during a conference call on Monday.
The German carmaker already owns a controlling stake in Scania and by tightening its grip on MAN to owning more than 30 percent, from 29.9 percent, it triggered a mandatory offer.
Its low offer of 95 euros per share for MAN is seen as unlikely to spark great investor interest, mirroring a method recently used by Spanish construction group ACS (ACS.MC) in its takeover of German rival Hochtief (HOTG.DE).
If few investors accept the offer, which values MAN at about 13.8 billion euros ($19.8 billion), VW will benefit by being allowed under German rules to gradually buy shares in the market and by getting regulatory approval allowing closer cooperation between MAN and Scania.
"It is a disappointment that once again a company is pushing beyond the 30 percent mark to then be able to act freely, without paying a takeover premium," said Henning Gebhardt, fund manager at DWS, MAN's No. 3 shareholder.
In a first step, VW , which has a war chest of almost 20 billion euros, will spend about 1.5 billion euros to raise its stake in MAN to 35-40 percent of voting rights.
Eventually, it envisions a trucks group combining MAN and Scania and saving about 400 million euros of costs per year.
"MAN SE shares the industrial logic behind a more intensified cooperation between MAN SE, Scania AB and Volkswagen AG," MAN said in a statement following VW's announcement, adding it expects to continue constructive talks with VW and Scania.
It said it would evaluate VW's offer once it has been published at the end of May.
The announcement by VW, which is being advised on the deal by Credit Suisse CSGN.VX, comes five years after MAN tried and failed to take over Scania, leaving relations frosty.
Since then, the two companies have resumed talks under VW's guidance. Last month's 4.9 billion euro rights issue of Porsche SE (PSHG_p.DE), VW's biggest shareholder, removed a stumbling block in VW's ability to shoulder takeovers.
Analysts said that VW's cash offer to MAN shareholders, worth 1.6 percent less than Friday's closing price for the stock, had been pitched intentionally low.
"This low-ball offer serves to start the takeover process but still have maximum flexibility," MM Warburg analyst Marc-Rene Tonn said.
MAN ordinary shares, which have gained more than 40 percent over the past year and trade at a 35 percent premium to the company's peers, turned positive after the offer, trading 1.5 percent higher at 97.99 euros at market close.
VW will also offer about 60 euros per preference share, a 14.2 percent discount on Friday's close.
Shares in Scania jumped as much as 10 percent as speculation that VW would force Scania to buy MAN evaporated. VW's blue-chip preference shares were 2.2 percent lower at 128.30 euros.
(Additional reporting by Ludwig Burger and Arno Schuetze in Frankfurt, Jan Schwartz in Hamburg and Helena Soderpalm in Stockholm; Editing by Alexander Smith)