Swedish truck maker AB Volvo made a 7.5 billion kronor (US$1 billion; EUR810 million) offer Tuesday to take over Japan's Nissan Diesel in a strategic move aimed at gaining a solid presence in Asia.
The move, which would give Volvo full ownership of Nissan Diesel from the current 19 percent, highlights Volvo's ambitions in Asia, where the company has lacked a local brand while owning Mack Trucks in the U.S. and Renault Trucks in Europe.
Volvo is the world's second-largest truck maker after DaimlerChrysler AG of Germany, while Nissan Diesel is Japan's fourth-largest truck maker.
Volvo said it estimates Nissan Diesel's net interest-bearing debt at 7.5 billion kronor (US$1 billion; EUR810 million), bringing the total cost of its planned acquisition of the Japanese truck maker to 15 billion kronor (US$2 billion; Ђ1.6 billion).
Nissan Diesel Motor Co. President Iwao Nakamura expressed support for the tender offer, saying the move will save costs in development and purchasing, including emission-reducing technologies, and present opportunities for efficient investments for long-term growth.
"What we want the most is growth," he told reporters at a Tokyo hotel after the offer was announced. "This move is the most effective way to achieve growth."
The 540 yen (EUR3.44; US$4.52) cash per share offer, which represented a premium of 32 percent based on the Japanese company's average share price during the past three months, both sides said.
Nissan Diesel shares jumped 18 percent in Tokyo to a bid-only 523 yen (US$4.37; EUR3.33), up from its Monday's close at 443 yen (US$3.71; EUR2.83).
Jorma Halonen, Executive Vice President of Volvo Group, said that Nissan Diesel would retain its name and that management will stay Japanese.
Volvo is aiming for 20 percent to 25 percent market share in Asia, about the same share the group controls in the U.S. and Europe, Halonen said, while declining to set a timeframe.
Nissan Diesel's strengths in Asia, including Thailand and Indonesia, are a good complement for Volvo, Halonen said in Tokyo. He said 100 percent ownership will help quicken decision-making, likely to prove critical in keeping abreast of upcoming more stringent emission requirements around the world.
Nissan Diesel holds a market share in Japan of about 24 percent in heavy trucks and 15 percent in the medium-heavy segment.
If approved by antitrust authorities, the deal would be completed by March 29, Volvo said.
Goteborg, Sweden-based Volvo became the top shareholder in Nissan in March 2006, buying a 13 percent stake in Nissan Diesel from Tokyo-based Nissan Motor Co., and upped its holding to 19 percent in September.
At that time, Volvo said the deal wold help balance the company's offerings of heavy trucks and give it broader geographical reach in Asia. Volvo sold its car division to U.S.-based Ford Motor Co. in 1999.
Nissan Motor, Japan's No. 3 automaker, which is allied with Renault SA of France, sold Nissan Diesel to better concentrate on its passenger car business.
Volvo on Tuesday said a joint study identified gains amounting to EUR200 million ($263 million) annually for the next five years, mainly as a result of increased purchasing volumes, but also from product development and access to each other's dealerships and service networks.
"During our joint synergy study, great trust grew between the companies and I believe that the merger is the best alternative for Nissan Diesel's future," Nakamura said.
Volvo's fourth quarter profit climbed 25 percent to 3.7 billion kronor (EUR409 million; US$533 million). The company, which has 83,000 employees, sold its car division to U.S.-based Ford Motor Co. in 1999.
Nissan Diesel, which has about 9,100 employees and is based in Saitama Prefecture, just north of Tokyo, reported earlier this month a 44 percent slip in profit for the latest quarter at 10.4 billion yen (US$86.9 million; EUR66.2 million) as sales inched down 0.4 percent to 347 billion yen (US$2.9 billion; EUR2.2 billion).
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