Daimler and Rolls-Royce not planning to raise their joint takeover offer for Tognum

Article by Christian Andrei, on March 14, 2011

Daimler's CFO Bodo Uebber doesn’t see why Daimler AG and Rolls-Royce Group Plc would have to raise their joint takeover offer for Tognum AG. Uebber said that they are sticking to their bid of 24 euros per share. On March 8, Daimler and London-based engine maker Rolls-Royce offered to buy the company in a deal that puts the value of the heavy-duty engine manufacturer at 3.2 billion euros ($4.41 billion).

This bid is higher by 30% compared to Tognum's March 4 closing price, the last trading day before the companies revealed their interest, says Automotive News. The shares traded above the offer price since Tognum said that it had yet to enter a deal with Rolls-Royce and Daimler on a price.

Some investors expect the bid to go up. In a note, Juergen Siebrecht, an analyst with HSBC, said that 29 euros per share would be a "fair takeover value." Daimler and Rolls-Royce are able be firm with their offer since Daimler's current 28.4% holding enables them to obstruct other companies from making any effort to acquire Tognum.

That’s because German law states that shareholders with more than 25% of a company have the power to veto any major strategic moves. Uebber said that Daimler and Rolls-Royce “have time” as they own 28.4% of Tognum and aim for 50% plus 1 share.

Tognum was recently valued at 3.32 billion euros. Daimler and Rolls-Royce are offering 16.5 times earnings before interest and taxes for Tognum. Bloomberg data show that acquirers paid a median of 13.25 times Ebit for assets in the auto- and truck-parts industry in the last five years.

Topics: daimler, rolls-royce

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