June 19, 2024

DealBook: Daimler and Rolls Royce Make Formal Offer for Tognum

Daimler and Rolls Royce made their joint offer for the engine maker Tognum official on Wednesday, leaving their bid unchanged from the initial proposal of 24 euros a share.

The deal values Tognum at 3.2 billion euros ($4.6 billion). Tognum shareholders have until May 18 to tender their shares.

Tognum management has suggested that shareholders who accept the offer will retain the right to a 50 euro cent dividend for 2010 if the deal is approved at the shareholder meeting on May 11. That would effectively make the bid worth 24.50 euros a share.

Daimler already owns 28.4 percent of Tognum, which was trading at about 18.50 euros a share before speculation about a bid began circulating before Daimler’s announcement on March 9, which means the offer represents nearly a 30 percent premium.

At midmorning on Wednesday, the company’s shares were trading at 25.54 euros. With the stock trading higher than the deal price, it could suggest that investors think the buyers will sweeten their offer.

“Twenty-four euros is our offer, and we’re sticking to it,” Florian Martens, a spokesman for Daimler, said in an interview.

Daimler’s existing stake in Tognum gives it a blocking minority, meaning that under German law it can reject any major strategic moves at the company, including the acceptance of a competing bid.

The joint bid becomes effective if 50 percent plus one of all Tognum shares are tendered. Tognum, which makes engines used in ships and power generation, among other things, is about 45 percent-owned by institutional investors. ING holds more than 5 percent, while First Eagle Management and BlackRock each own more than 3 percent.

Top management and members of the supervisory board at Tognum own about 5 percent of the company, according to a recent presentation. While they have welcomed the offer, they have not yet issued a recommendation on it.

Once that 50 percent level is reached, the buyers can begin integrating the marine division of Rolls Royce with Tognum, and undertake other parts of their strategic plan, which includes a billion euros in capital expenditures and research and development over three years.

Daimler and Rolls Royce plan to keep the company’s current dividend policy in place until they gain control of 75 percent of the company, after which they will maintain a “conservative balance sheet,” according to an agreement the companies signed with Tognum.

Daimler has been the owner of Tognum before. In 2005, it sold the company, then known as MTU Friedrichshafen, to the Swedish private equity firm EQT for 1.6 billion euros. EQT then took it public in 2007 at 24 euros a share, the same price being offered now.

Article source: http://feeds.nytimes.com/click.phdo?i=de5b3b7f7fd66d228b0c3ac21fcf5986

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