x Abu Dhabi, UAEWednesday 26 July 2017

Ipic dispute delays truck giants' merger

A row between the German truck-maker MAN and Abu Dhabi's International Petroleum Investment Company is obstructing MAN's proposed merger with Scania.

A Man truck is assembled at the Munich factory. Ipic owns 70 per cent of Ferrostaal, Man's former services subsidiary.
A Man truck is assembled at the Munich factory. Ipic owns 70 per cent of Ferrostaal, Man's former services subsidiary.

A dispute between the Man Group and Abu Dhabi's International Petroleum Investment Company (Ipic) is complicating the German truck maker's bid to merge with Scania, its Swedish competitor, it has emerged.

Ipic bought 70 per cent of Ferrostaal, Man's former industrial services subsidiary, for €450 million (Dh2.34 billion) in 2008.

But Ipic has so far refused to buy the remaining 30 per cent because of a continuing bribery investigation at Ferrostaal that began in 2009.

The company is under investigation by Munich authorities looking into allegations that it gave bribes to win contracts in numerous countries.

Ipic and Man are now in arbitration proceedings in Germany to settle the wrangle over Ferrostaal's ownership, an issue analysts say Man needs to resolve before the proposed merger.

Man said in its annual earnings announcement yesterday that it was "still open to quickly resolving the ownership matter at Ferrostaal". But Georg Pachta-Reyhofen, the chief executive of Man, said an agreement "will not be at any price".

"The issue with Ipic has to be solved and only then can merger talks start with Scania," said Hermann Reith, an analyst at BHF Bank in Frankfurt.

Barring a resolution, Mr Reith said a merger would be jeopardised by risks that Scania shareholders may not be willing to accept.

"As long as there are potential risks, it cannot be explained to the Scania shareholders what will be the right price when the Man and Scania shares are merged," he said.

Ipic did not respond to a request for comment.

As arbitration proceeded, Frank Lutz, the chief financial officer of Man, said yesterday that the company might even consider buying back control of Ferrostaal to resolve the dispute, rather than selling the remainder to Ipic.

Man exercised a "put" option to sell the remaining 30 per cent of the company to Ipic in January last year, but Ipic refused to honour the contractual option because of the bribery investigation.

However it is settled, putting the ownership debate to rest would "minimise risks" to a merger with Scania, Mr Pachta-Reyhofen said yesterday.

But Mr Lutz said talks with Ipic could last months or years, Bloomberg News reported, and the chance of Man buying back control of Ferrostaal was "clearly less than 50 per cent".

A merger between Scania and Man, one of the world's largest truck makers, has been under consideration since Man launched a failed takeover bid in 2007.

The Ferrostaal dispute comes as Ipic aggressively broadens its portfolio of global investments, most of which are in the energy and industrial sectors.

Ipic recently raised US$4.4bn (Dh16.16bn) from global investors to finance its purchase of part of Spain's second-largest oil company, Compania Espanola de Petroleos.

Man, meanwhile, reported a profit of €342m for last year's fourth quarter - a reversal of a €472m loss in the same period of 2009.

The company also reported robust truck sales in January and said it expected strong profits this year.

 

afitch@thenational.ae