DBRS Comments on Volkswagen’s Increased Stake in MAN

DBRS notes that Volkswagen AG (VW or the Company) recently increased its holdings in the ordinary shares of MAN SE (MAN) to 30.47% from 29.9%. Subsequently, in accordance with German takeover law, VW is required to make a mandatory offer to all shareholders of MAN to acquire their shares in MAN. However, notwithstanding this required purchase offer by German takeover law, it is not anticipated that the Company will acquire all the ordinary shares in MAN in the near future. DBRS notes that VW’s expected offer price of EUR 95 per common share of MAN is at a discount to the current trading price and will likely therefore not be viewed favourably by shareholders. Instead, VW has indicated that it currently targets a shareholding in MAN in the range of 35% to 40%, which is estimated by the Company to be sufficient to obtain merger control clearance. DBRS notes that this represents a moderate increase in VW’s shareholdings in MAN that would be readily absorbed by the Company’s very strong liquidity position (i.e., as of March 31, 2011, the cash position of the Company’s industrial operations exceeded EUR 19.7 billion). As such, DBRS does not expect these developments to have an impact on the Company’s current ratings.

In addition to MAN, VW also owns a majority 71.8% stake in Scania AB (Scania), (which is consolidated by the Company and is among its portfolio of nine brands). VW has targeted increased cooperation and higher synergies of these companies in conjunction with its own trucking operations. However, these efforts thus far have been significantly constrained by antitrust restrictions. VW’s increased position in MAN, with merger control clearance, is therefore a necessary step with respect to this targeted higher cooperation among the trucking entities. VW has indicated that initial synergies of at least EUR 200 million per annum (primarily in the areas of purchasing and procurement) could be achieved, with the potential of substantial further synergies going forward.

Notes:
All figures are in euro unless otherwise noted.

The applicable methodology is Rating Companies in the Automotive Industry, which can be found on our web site under Methodologies.