Volkswagen’s bid to acquire the remainder of Scania that it does not already received a further blow when the truckmaker’s third-biggest shareholder rejected the offer, setting up a tense conclusion to the offer period.
Alecta, the Swedish pension manager, which held 2 per cent of Scania’s capital at the end of March, rejected VW’s Skr200 per share offer, because it believes it is too low. The offer period ends on Friday.
VW, which currently controls 62.6 per cent of Scania’s share capital, needs 90 per cent to squeeze out minority shareholders and force a deeper co-operation among its truck assets to better challenge rivals Daimler and Volvo.
A 10 per cent rejection level would therefore be enough to sink VW’s offer. So far four Swedish pension funds which together hold more than 4 per cent of the share capital have publicly said no. Investor, the holding company of the Wallenberg family, which holds about 0.4 per cent of Scania, has also rejected the offer.
A rejection would represent a rare setback for VW patriarch and chairman Ferdinand Piëch, who has built a mighty stable of 13 automotive brands and is used to getting his own way.
Scania’s independent board members recommended last month that shareholders reject the offer but VW has refused to improve it.
VW has instead tried to woo Swedish shareholders by promising to preserve jobs, plants and Scania’s headquarters.
The Swedish shareholder association (SSA) has recommended shareholders should accept the bid. Nordea, Didner & Gerge and GAMCO Asset Management have come out in favour.
Scania’s shared soared to within touching distance of the offer price when it was first tabled in February. But since then the stock has drifted lower as opposition to the bid has mounted. On Wednesday Scania’s shares tumbled a further 4.4 per cent to Skr175. Analysts expect the shares to fall further if the bid fails.
“Achieving the 90 per cent acceptance threshold for VW is not a given,” Alexander Whight, analyst at JPMorgan Casenove, told clients.
Before Alecta’s rejection JPMorgan had estimated that roughly 8 per cent of shareholders were unlikely to accept the bid; its estimate included rejection as well as “hard to get” shareholders, such as index funds.
Churchill Capital, an investment advisory firm, told clients that “there is an increased risk that the 90 per cent condition may not be met, thus leading to deal failure. Moreover, VW’s current offer is now final, removing the option for a bump.”
Although VW could in theory still raise its bid, analysts see this as unlikely as this would create reputational risks for VW and potentially open it up to sanctions or lawsuits, because it had previously ruled out doing so.
If the deal fails, VW would be prohibited from launching another offer for 12 months unless Scania’s board recommends it.