A merger between two of the world’s biggest truck companies is being held up by a dispute between MAN and an Abu Dhabi-based investment company it sold a 70% stake of its plant manufacturer Ferrostaal to.
International Petroleum Investment Co (IPIC) bought its shares of Ferrostaal in 2009 in a deal that valued 100% of Ferrostaal’s equity at about 700 million euros.
Since then the former MAN subsidiary has been embroiled in allegations of bribery dating back to the 1990s.
In December 2009, MAN agreed to 150 million euros in fines to settle bribery investigations involving two subsidaries that cost the jobs of several of its top executives. An investigation into MAN Ferrostaal is still ongoing and IPIC has so far refused to buy the remaining 30%.
MAN itself is 30% owned by Volkswagen which also owns 71% of Scania. The German giant has been pushing for a merger between its two investments for some time, however both Volkswagen CEO Martin Winterkorn and its supervisory board chairman of MAN Ferdinand Piech have stated that the merger deal resides on the Ferrostaal dispute being resolved.
Although Volkswagen remains pre-occupied with its merger with Porsche, it has been rumoured that it would prefer a deal to be in place by May putting pressure on MAN to close the Ferrostaal matter as soon as possible.
While reporting that MAN had returned to profit in the final quarter of 2010 this week, CEO Georg Pachta-Reyhofen emphasised that the company is still open to quickly resolving the ownership of Ferrostaal with IPIC. Although he added that “an agreement will not be at any price”.
According to MAN CFO Frank Lutz, MAN may not have to force the complete sale of Ferrostaal to IPIC to complete the merger, raising the possibility that it could buy its way out of the dispute. Lutz told reporters that MAN is even exploring the possibility of reversing the sale should talks with IPIC fail to find a resolution.
MAN’s AGM was scheduled for April but this the company announced last month that will move it to June with rumours circulating that Ferrostaal was the reason.
Lutz has now admitted that MAN delayed the conference because it hoped a solution could be reached with IPIC during this time, but noted that “this optimism wasn’t warranted.”
