Volvo reaches agreement to buy rival Scania

STOCKHOLM, Sweden (Aug 6, 1999) — After a seven-month pursuit, truck-maker Volvo AB said today it had reached an agreement to buy rival truck and busmaker Scania AB for 60.7 billion crowns, about $7.5 billion US.

Volvo would purchase the 78% of Scania shares it does not already own, creating the world’s second-largest producer of heavy trucks.

The controlling stake in Scania is currently held by Investor AB, a holding company. Volvo said it was offering 315 kronor in cash for Scania shares, 29% higher than Scania’s share price yesterday.

The total price includes the shares Volvo had already purchased earlier this year. Before the transaction, Volvo owned 21.6% of the company after it started buying shares in January in hopes of obtaining a controlling interest. Scania and Investor resisted.

Investor said it agreed to sell its shares because it represented “a long-term suitable solution for Scania and thus, its shareholders.”

In a statement, Scania’s board of directors was more cautious, stating, “The provisional reaction of Scania’s board is that the value of the offer appears fair; however, the terms of Volvo’s offer will have to be reviewed in detail before a formal recommendation will be issued to shareholders.”

The combined group would have 31% of the European heavy truck market, the biggest share ahead of DaimlerChrysler AG, which builds Freightliner and Sterling trucks in North America. It would own 19% of the market worldwide, behind DaimlerChrysler’s 25%.

Scania would be a separate unit within Volvo, and the brands and distribution networks will stay separate.

Volvo said the purchase of Scania would reduce costs through combined purchasing, research and development and engines and transmissions.

The agreement appears to end speculation that Volvo could buy Navistar International, the second-largest commercial vehicle producer in North America. Volvo had spoken with the company about a merger earlier this year.