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VW eyes full control of European truck giants.

German truckmaker MAN and Swedish group Scania are in merger talks, Scania said, as Volkswagen aims for full control of both to take on bigger rivals.

Scania and MAN said no decision has been reached as they reacted to reports Volkswagen, which owns key stakes in both, has a new plan for its truck business to better take on world leader Daimler and number two Volvo.

The reports had said Volkswagen was planning to increase its stake in Scania to between 75-80 per cent from nearly 46 per cent, with its near-30 per cent stake in MAN going to the Swedish firm.

Scania would then bid for the rest of MAN, the report said, in what would be a piquant turnaround from the hostile 2006 bid which MAN made for Scania under an earlier CEO and which failed.

"Financially, it's a very neat solution," said Metzler Equities analyst Juergen Pieper of a possible takeover of MAN by VW via the Swedish company.

At Friday's closing price MAN was worth about 11.86 billion euros ($16.22 billion) while Scania was valued at nearly 116 billion Swedish crowns ($16.90 billion).

"We share the view, that from VW's perspective this seems the smartest way to create a truck group, especially if partly financed by a Scania B-share capital increase," said Commerzbank analyst Daniel Schwarz.

"However, we would not expect the truck group to be formed in the short term, rather for VW to focus on the Porsche integration."

Volkswagen is busy completing its absorption of Porsche. It has a war chest of 19.6 billion euros and is generating enough cash to take over MAN and Scania, as Bernstein analyst Max Warburton pointed out at VW's third-quarter results last month.

Scania said the two companies have been mulling various industrial projects that would generate savings in research and development, manufacturing and sourcing.

"This process has shown that a full realisation of potential synergies requires a closer co-operation by combining the two companies, while maintaining the unique brand values of the respective company," it said.

At the same time, it said there were a number of outstanding issues of "commercial and legal nature".

MAN was rocked by two bribery scandals in 2009, one of which led to the departure of a former chief executive. A third possible case at a former unit cropped up in September this year.

MAN described the talks with Scania as "mutually friendly" but made no mention of a link-up with the Swedish firm.

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Publication:TradeArabia (Manama, Bahrain)
Date:Nov 16, 2010
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