Saturday, Mar 06, 2004

Swedish truckmaker Volvo will have to find a buyer for its A shares in Scania, which control about 25 per cent of the votes in its arch-rival, after it confirmed the sale of its B shares in Scania to Deutsche Bank for SKr15bn (Dollars 1.98bn), for placement yesterday.

However, Thursday's deal has not gone smoothly for Deutsche Bank, whose attempt to conduct the Nordic region's largest-ever placement has been complicated by a slide in Scania's share price.

Volvo said it sold 63.7m B shares to Deutsche Bank, corresponding to about 5.8 per cent of the votes and 31.8 per cent of the capital in Scania. The move was in line with demands from the European Commission, which has given Volvo until April 23 to divest its Scania stake after blocking a merger of the two.

Volvo still owns Scania A shares, which correspond to about 24.8 per cent of the votes and 13.7 per cent of the capital. The company said it had undertaken to Deutsche Bank not to "divest the remaining A shares in Scania in such a manner that would, directly or indirectly, involve public market transactions within a period of 90 days".

Leif Johansson, Volvo's chief executive, said this meant the A shares would not be floated, though a direct sale to one or more buyers would still be possible. Investor, the holding company of Sweden's Wallenberg family, is widely expected to increase its stake in Scania. Alternatively, Volvo could continue with a plan to transfer the shares to a new listed company called Ainax.

Volvo sold the B shares for SKr235 each, below its average buying price of SKr264. Mr Johansson said if dividends received from Scania during the period were taken into account the deal could be seen as breaking even.

Scania B shares fell to SKr229 on Thursday and dropped another SKr1 yesterday to close at SKr228. At current prices, Deutsche Bank faces a potential loss of up to Dollars 50m on the deal. Yesterday it flagged that it owned 19.5m Scania B shares representing 9.8 per cent of the capital and 1.8 per cent of the votes in Scania.

Mr Johansson said Volvo was committed to returning half the eventual proceeds of the Scania sale to shareholders, with the other half being used to strengthen the company's financial position and give scope for acquisitions.

By NICHOLAS GEORGE

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