Volvo, Renault Make Progress In Takeover Talks
April 6, 2000
AB Volvo of Sweden, which entered high-level talks last month to acquire Renault's commercial truck division, resolved two of a "handful" of key issues in negotiations with Renault that should lead to a deal by the end of this month to purchase the Renault Vehicules Industriels commercial vehicles unit, a company source disclosed to Stark's News Service Interactive.
The deal would include RVI's North American subsidiary Mack Trucks, the fourth largest maker and seller of heavy-duty commercial vehicles in North America. Volvo is the fifth largest.
A key issue in the Volvo-Renault acquisition talks, the source explained, has been Renault's preference of payment for its commercial trucks division in Volvo shares, rather than all cash. A pending accord now is likely to feature a mixture of cash and stock as payment for the Renault assets. Volvo has been flush with cash since the sale of its car division to Ford Motor Co for $4.7 billion last year.
A second critical issue, the source noted, are future diesel engine liabilities of Mack Trucks. Mack is said to have fallen behind on capital reinvestment in the engine business. It reportedly will need a major infusion of capital to redesign its entire line of powerplants, to comply with looming emission standards from the U.S. Environmental Protection Agency.
Volvo had been reluctant since last September during initial talks with Renault to assume the Mack engine liabilities. But Volvo recently reversed itself and now appears willing to accept them, another source stated. He declined to be more specific.