Sweden-based Volvo has reached a deal with the major shareholder of rival Swedish truck maker Scania to buy a controlling interest in the company.
Volvo has been trying to buy Scania since early this year, when it bought 13% of Scania stock. In February, talks between Volvo and Investor, Scania's main stockholder, broke down because of a disagreement in the value of the company. In May, Volvo increased its voting stake by 2.1%. At that time, Investor officials said they believed the company could prosper on its own and were interested in selling the company, but not to Volvo.
Investor and Volvo announced an agreement Friday after coming to an agreement on the valuation of Scania. Scania's owners also said the economies of scale and global strength that can be attained through such a merger are vitally important, considering the increasing cost to develop new product.
Tom Clifford, director of public relations for Volvo Group North America, said the deal will be virtually invisible in North America. "In the long run, the truck operations in North America will benefit from the synergies and the expected cost reductions," Clifford says. "Our purchasing power will be increased and so forth."
The purchase price is approximately $7.4 billion. Volvo has been flush with cash since it sold its car operations to Ford earlier this year. The deal will create the world's second largest manufacturer of heavy trucks and buses. The combined companies will be second only to DaimlerChrysler (parent company of Freightliner) in terms of sales.