News of December 19, 2000
U.S. Competition Authority Gives Clearance To AB VOLVO'S Acquisition Of Renault V.I. /MACK
Volvo and Department of Justice have entered into a consent decree which is awaiting approval by U.S. district court in Washington D.C. Thereby AB Volvo has now received clearance from the U.S. Department of Justice for the acquisition of Renault V.I. /Mack. AB Volvo and Renault SA expect to conclude the transaction at year-end.
The approval is subject to the condition that Volvo Trucks' North American low cab-over-engine (LCOE) business be divested. This segment amounts to less than 3% of the total heavy truck market in North America. The Volvo Group is now establishing a new business area, Volvo Global Trucks, comprising the Volvo, Renault and Mack truck brands. Tryggve Sthen will be chief executive officer of the new business area. Today Tryggve Sthen is CEO for Volvo Trucks. Volvo Global Trucks represents 70% of the Volvo Group's worldwide sales. The intention is that the management of Volvo Global Trucks will be operational by the beginning of 2001.
In April of this year, AB Volvo and Renault SA concluded an agreement in principle whereby AB Volvo will receive 100% of Renault's truck operations, Renault V.I./Mack, in exchange for 15% of AB Volvo's shares. The agreement was finalized in July and approved by the European Union (EU) in September.
"I am very pleased with this decision," says Leif Johansson, Volvo Group's President and Chief Executive Officer. "It means that after the closing we can immediately start the integration process. We are very eager to quickly implement the strategy for the new truck group and the merged powertrain units. Our intentions are to have a functional management and organization in place by early next year."
As a result of the acquisition,
Volvo Group is becoming the world's second-largest and Europe's biggest
manufacturer of heavy trucks, with a strong global market presence and
almost twice its former volume of business. "The acquisition will
increase the Volvo Group's possibilities to deliver outstanding value by
supplying world class transport solutions to our customers and
dealers", says Leif Johansson. Volvo Trucks' and Renault V.I./Mack's
combined sales in 1999 amounted to approximately 151,000 heavy trucks and
22,500 light and medium-heavy trucks. Their combined share of the market
for heavy trucks in Western Europe amounts to approximately 28%, and to
approximately 24% of the market in North America.
Department of Justice grants clearance
The U.S. Department of Justice decided to grant clearance to the transaction under the condition that AB Volvo divests Volvo Trucks' LCOE business in North America. This segment represents less than 3% of the total heavy truck market in North America. In 1999, Volvo Trucks delivered about 2,100 trucks in this segment. AB Volvo has agreed with the authorities to divest Volvo Trucks' LCOE business within three months.
"The LCOE segment is only a limited portion of our North American truck operations," says Volvo Group CEO Leif Johansson, and we are in discussions already with identified interested parties. The divestment involves only those assets associated with the LCOE operations, and will affect the Xpeditor models within Volvo Trucks North America.The Volvo trademark and assembly plants are not included.
EU approval granted in September
The EU decided to approve the transaction in September, subject to a number of concessions, as follows:
With the acquisition of Renault V.I./Mack, the Volvo Group becomes the world's second largest and Europe's biggest manufacturer of heavy trucks. Following the acquisition, Volvo Group will have a substantial global market presence, with strong positions in Europe and North America. AB Volvo's acquisition of Renault V.I./Mack is now creating favorable conditions for implementing aggressive global strategies for growth in established and new markets.
Benefits of coordination
Volvo Group's acquisition of Renault V.I./Mack offers major opportunities for synergies. It is calculated that after two years the total integration gains will amount to about SEK 3.5 billion annually. Over a longer term, the gradual integration of the two companies and their product programs will yield synergies of approximately another SEK 3 billion on an annual base. About half of the synergies will take place in procurement, but substantial synergies have also been identified in the engine sector, based on the fact that it will be possible to optimize future engine families for use with Volvo, Renault and Mack products.
(Dec. 18, 2000)