MAN Inks Deal For 25%-Plus-1-Shr Sinotruk Stake
German truck maker and engineering company MAN SE (MAN.XE) said Wednesday that it plans to acquire a 25%-plus-one-share stake in China's Sinotruk Ltd. (3808.HK) for EUR560 million to forge a long-term strategic partnership.
The deal marks MAN's latest move to increase its footprint outside its core European market, particularly in the so-called BRIC countries - Brazil, Russia, India and China - where demand for transportation is expected to rise in the long term along with economic growth.
MAN only four months ago finalized the acquisition of Volkswagen AG's (VOW.XE) Brazilian heavy-truck operations in a deal worth about EUR1.18 billion. Volkswagen holds a 29% stake in MAN, making it the company's biggest shareholder.
Munich-based MAN said it would license to Sinotruk its TGA truck technology, including engine, chassis and axles technologies, as a basis for the production of a new heavy-duty truck series.
The deal "is based on the good relationship we have had with Sinotruk for many years," said MAN Chief Executive Hakan Samuelsson. "MAN's investment in Sinotruk lays the foundation for the joint development of a new heavy-truck series tailored to emerging markets."
MAN said the price represents Sinotruk's 60-day trading average plus a 21% premium. The deal includes MAN purchasing Sinotruk's ordinary stock as well as a capital increase at the Chinese company.
MAN is set to invest EUR560 million by subscribing to convertible bonds and purchasing existing shares from Sinotruk's parent, China National Heavy Duty Truck Group, according to Sinotruk's statement to the Hong Kong Stock Exchange.
On full conversion of the convertible bonds, MAN will emerge as the largest single minority shareholder with a 25%-plus-one-share stake, with Sinotruk's parent company holding 51%.
MAN CEO Samuelsson told reporters the company aims to have four of Sinotruk's 17 supervisory board seats.
Sinotruk sold around 100,000 heavy trucks in 2008 and accounts for a market share of around 20% in China.
The Jinan-based company last year posted revenue of approximately EUR2.5 billion and reported earnings before interest and tax of EUR122 million.
"Sinotruk and MAN will work together closely to shape our future and maintain our position as one of the leading heavy truck manufacturers," said Sinotruk Chairman Chunji Ma.
"This is the biggest German investment into a listed Chinese state-owned enterprise (as opposed to a joint venture or buying into a privately owned company)," said J.P. Wang, managing director at J.P. Morgan, which advised Sinotruk on the deal. MAN was advised by Goldman Sachs.
MAN shares gained on the news. At 1346 GMT, they traded up EUR1.61, or 3.6%, at EUR45.99, while the blue-chip DAX index traded up 2%.
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