Daily Management Review

Source say Volkswagen’s Large Engine Units being Circled by Peers


02/10/2016




As rivals sense an opportunity to get their hands on the asset as a result of the car maker's emissions scandal, Volkswagen has received expressions of interest for a unit making engines used in ships or small power stations, several sources familiar with the matter told media.
 
Sources said that there have been interests expressed to buy off the operations of MAN that are not central to its trucks business by the peers from China, Europe and the United States who have recently told Volkswagen about this. The sources also added that the unit may be valued at up to 4-5 billion euros ($4.51-$5.6 billion).
 
Volkswagen made an operating profit of 206 million euros on sales of 3.3 billion euros in 2014 and the company has strictly maintained that the unit in question is not for sale.
 
The reported interest in the unit was termed as unfounded "speculation" by a Volkswagen spokeswoman.
 
Claiming that it was unable to calculate the cost for fines, lawsuits and vehicle refits after cheating emissions tests, the largest carmaker of Europe had postponed its publication of its 2015 results last week as the carmaker is struggling to cope with the fallout from the scandal.
 
Options of expanding overseas including a stock market listing were being kept open by the trucks unit which made this statement separately earlier this week.
  
In order to keep above water until it can refinance itself in the bond market as it used to before the scandal broke, Volkswagen secured a 20 billion-euro bridging loan in January. No specific assets have been discussed with respect to a potential divestment and no fire sales are necessary, the company has stressed.
 
It was clear that MAN non-truck diesel would be the first thing that Volkswagen would look at if the company did have to sell something to meet the costs of the scandal, people who were familiar with the matter said.
 
It is expected that Volkswagen would soon engage in a round of exploratory talks with a potential Chinese suitor even as the company continued to get expressions of interest for the unit, sources in the company said in the media.
 
"There has been a formal exchange. Talks are in preparation. But it's all very early stage," the company source said. No due diligence assessment of the asset by any peer has been allowed o be done by Volkswagen, the source added.
 
Yuchai, Weichai and Sinomach are among the large Chinese peers of Volkswagen. Buying up industrials groups in recent weeks as they try to broaden their international footprint, Chinese companies have been on a acquisition spree in Germany recently.

Investment bankers have named General Electric, Siemens and Sulzer as potential suitors. However, a source said that these companies would most likely only to show interest in parts of the business.
 
"Everyone is expecting it to come out – the question is when," another banker familiar with the car industry said.
 
(Source:www.reuters.com) 






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