VW/MAN: The award for the least effective defence in a hostile takeover goes to...MAN. The management’s failure to put any real effort into challenging Volkswagen’s opportunistic bid to seize effective control of the German truckmaker is an embarrassment. Germany’s lax takeover rules mean VW is probably unstoppable. But that is no excuse for MAN to offer so little resistance.
The targets of hostile takeovers are expected to fight: denouncing the predator’s offer as "derisory", aggressively promoting the existing strategy, hinting that the market’s earnings forecasts are behind the curve, and pointing to sector exit multiples that would boost analysts’ break-up valuations.
But MAN’s defence against VW has made zero impact. It comprises turgid letters from the supervisory and executive boards, plus fairness opinions from Barclays Capital and Goldman Sachs. Almost all of this is legalese suffixed with the simple assertion that VW’s offer undervalues the business.
Of course, this isn’t a normal takeover. VW’s nil-premium offer, pitched at MAN’s prevailing market price last month, is designed to exploit a lax German takeover regime that makes it easy for bidders to take effective control without paying a premium.
Assuming VW’s bid fails, it will be able to buy MAN shares in the market. VW only needs to raise its stake from the current 30.5 per cent to 40 per cent to become the dominant force at poorly-attended shareholder meetings.
MAN’s management also likes the strategic logic of the VW proposal. If VW gets control, it can extract synergies with an estimated present value of euro 1.4 billion. MAN shareholders who don’t sell out would get part of that benefit. But the key issue is that MAN shareholders are still being deprived of a premium. The only way to get that would be if the market priced it into the shares. The market, however, takes its cue from management. And management isn’t providing the arguments for investors to demand more value.
As a preliminary step to taking control, VW is proposing more nominees to the supervisory board at today’s annual meeting. Outside investors could thwart that — it’s not clear that VW has yet amassed sufficient shares to ram through its appointments. But don’t bank on any help from MAN’s management.
