Daimler, Rolls-Royce make $4.4 billion bid for Tognum

BERLIN: Daimler AG and Rolls-Royce Group Plc made a takeover bid for Tognum AG valuing the German manufacturer at 3.2 billion euros ($4.4 billion) as they target growing demand for heavy engines in emerging economies.

The stock traded as much as 3.4% above the offer price of 24 euros per share after Friedrichshafen-based Tognum said the companies haven’t reached agreement on price.

The offer is 30% above the March 4 close, the last trading day before the companies publicly expressed their interest. Gaining control of Tognum, which Daimler used to own, would give the two companies the world’s secondlargest maker of high-speed diesel engines for the marine, energy and defense industries after Caterpillar Inc. The deal would represent Daimler’s biggest purchase since buying a 34% stake in Mitsubishi Motors Corp in 2000, according to Bloomberg data.

“The offer represents a reasonable premium,” said Marc-Rene Tonn, an analyst with M M Warburg in Hamburg. “Given Daimler’s large cash reserve, it needed to pose the question about what to do with it. It’s an interesting expansion.” Tognum rose to as high as 24.82 euros and was up 6.2% to 24.66 euros as of 12:47 pm in Frankfurt trading. Daimler added 2.2% to 50.33 euros, while Rolls-Royce shares gained 2.8% in London.

Tognum welcomed the potential cooperation with Daimler and Rolls-Royce , even with an agreement on price outstanding. The companies agreed not to cut jobs at Tognum and retain existing facilities, including the headquarters in Friedrichshafen.

ZETSCHE ‘OPTIMISTIC

The bid is conditional on more than 50% of the shares being tendered. Daimler Chief Executive Officer Dieter Zetsche said he was “optimistic” of reaching that target , even as investors lobbied for a higher price. Delta Lloyd Asset Management, which owns 1.4% of Tognum, doesn’t plan to sell its shares at the current offer price. “We are looking for a higher price,” said Delta Lloyd fund manager Edwin Slaghekke.

“Tognum has a huge strategic value. It invested a lot in research and development, and in two-to-three years will have a larger competitive advantage.” The offer for Tognum is “highly attractive”, Daimler spokesman Florian Martens said by telephone. A Rolls-Royce spokesman declined to comment beyond Wednesday’s statement.