Volkswagen has suffered a setback in its efforts to create Europe's biggest truckmaker as a European regulator pushed it to drop plans to take control of Man SE's supervisory board.
The German carmaker, which has made a takeover offer for Man that expires on Wednesday, had wanted several of its managers to take seats on Man's board at the truckmaker's annual shareholders' meeting in Munich.
The move is part of VW chairman Ferdinand Piech's plan to create Europe's biggest truck maker by combining Man and Sweden's Scania to take on Daimler and its next biggest rival Volvo.
But the European Commission said VW's overly hasty grasp for control would breach merger rules and told Europe's biggest carmaker to wait for regulatory approval of closer cooperation of VW, Man and Scania.
"One cannot exercise control ahead of the Commission's decision," a spokeswoman for EU competition commissioner Joaquin Almunia said.
VW said it was withdrawing its proposal to appoint VW chief executive Martin Winterkorn, VW chief financial officer Hans Dieter Poetsch and trucks chief Jochem Heizmann to Man's board.
The group said it was in talks with the European Commission and was confident it could submit the formal application for merger control clearance in the coming weeks.
VW launched a low-ball bid valuing Man at about €13.8 billion last month, aiming to raise its stake in the truckmaker to 35-40 per cent of voting rights for now to get regulatory approval for closer cooperation between Man and Scania without buying the whole company.
"I think the initial rationale behind making the mandatory offer was to reach a level of shareholding which would give them control at the AGM and at the same time clear all the legal hurdles for a future full takeover of Man in whatever form that may come," Morgan Stanley analyst Laura Lembke said. "I think we're still a little way away from that."
Eventually, VW envisages saving about €400 million of costs in procurement, development and production by setting up a combined trucks group, but it has not yet provided details.
Man chief executive Georg Pachta-Reyhofen said he sees substantial synergies in any cooperation with VW and Scania, which will allow the truck maker to expand its range to include vehicles weighing in at less than 7.5 tonnes.
So far, VW has vowed to keep jobs and sites and made vague promises not to touch the "brand characteristics" of Man and Scania, but analysts expect Mr Piech, who is also chairman of Man, to soon replace the carrot with the stick.
Man sees its engines and the passenger cabin falling under its specific "brand characteristics" that should not be mixed with Scania's, but analysts expect Mr Piech to push for more.
VW, which aims to overtake Japan's Toyota Motor as the world's biggest vehicle manufacturer by 2018, has also been working to fold Porsche into its business as a 10th brand, and Mr Piech has also set his sights on Alfa Romeo.
Reuters