AB Volvo's board of directors announced it will make a public offer to acquire the Japanese truck manufacturer Nissan Diesel. The offer - which is supported by Nissan Diesel's board of directors
- means the total value of Volvo's offer amounts to SEK 7.5 billion ($1.063 billion U.S).
Volvo already owns a 19 percent holding in Nissan Diesel and preference shares that can be converted to an additional 27.5 percent after full dilution.
"With Volvo as owner, Nissan Diesel gains the resources and the financial stability needed to fully capitalize on the opportunities that a closer cooperation offers to both parties," says Volvo CEO Leif Johansson.
Volvo's offer for Nissan Diesel represents a premium of 32 percent based on the average prices during the past three months. The offer is open through March 23 and is not conditional upon a lowest level of acceptance, but is dependent on the necessary approvals from the anti-trust authorities.
Volvo anticipates that payment can be made for acquired shares on or about March 29, 2007. If the offer for Nissan Diesel is implemented, Volvo will have paid a total of SEK 13 billion for all shares, corresponding to JPY 469 per share.
"Nissan Diesel's products and know-how represent a valuable complement to the Group's truck business," says Leif Johansson. "Nissan Diesel holds a solid position in Japan and the rest of Asia where the Volvo Group foresees substantial growth potential. A merger offers both parties even greater possibilities to learn and benefit from each other's know-how and resources."
"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," says Iwao Nakamura, president of Nissan Diesel.
Since Volvo's first purchase of shares in Nissan Diesel, Volvo's Deputy CEO Jorma Halonen was appointed vice chairman in Nissan Diesel's board. Jorma Halonen sees major mutual advantages with an even closer cooperation.
"Nissan Diesel can benefit from the Volvo Group's resources and know-how, but Volvo can also benefit greatly from Nissan Diesel's experience of medium-heavy trucks and its expertise in, for example, hybrid technology," he says.
In 2005, Nissan Diesel sold 42,000 trucks and buses. In Japan, Nissan Diesel holds a market share of about 24 percent in heavy trucks and 15 percent in the medium-heavy segment.
The major portion of the integration gains is as a result of increased purchasing volumes, but positive effects also arise within product development, engines and drivelines. Other gains arise in that the companies have access to each other's dealer and service networks, primarily in Asia but also in other parts of the world.
In March 2006, Volvo acquired 40 million shares in Nissan Diesel, corresponding to 13 percent of the votes and capital. In September of the same year, Volvo increased its ownership to 58.2 million shares corresponding to 19 percent of votes and capital. At the same time, Volvo purchased all 57.5 million preference shares in the company that through 2014 would be converted in stages and which in 2014 would provide Volvo with 46.5 percent of the votes and capital in the company, after full dilution.
However, as early as in April 2008, Volvo's ownership after conversion of preference shares would have increased to 41.9 percent.