Daimler and Rolls-Royce face strong shareholder and management opposition to their proposed joint offer for Tognum that values the German engine maker at €3.2bn ($4.5bn).
The two companies said they planned to create an equally owned joint venture that would launch a €24-a-share bid aimed at taking over Tognum, a diesel engine supplier and former Daimler subsidiary.
Tognum’s management reacted by saying that, while they generally welcomed a partnership, they did not endorse the price offered by the German premium carmaker and the British engineering group.
“As yet, no agreement regarding the offer price was achieved,” Tognum’s management, which owns 6.4 per cent of the group’s shares, said.
Daimler and Rolls said the offer represented a 22 per cent premium on the German engine supplier’s average share price in the past three months.
But three hedge funds and two institutional investors, one of which is among Tognum’s five largest shareholders, told the Financial Times that they expected an at least 10 per cent higher offer as the current one did not reflect potential synergies with Rolls. “The €24 is too low because Tognum is a company with high earnings power ... and has invested a lot in research and development,” said Edwin Soagslaghekke, fund manager at Delta Lloyd, a Dutch institutional investor that owns 1.4 per cent of Tognum’s shares.
Analysts voiced similar doubts, pointing to Tognum’s cutting-edge fuel efficiency technology which they say would allow it to sell its engines at a high premium in the future.
“The shareholders I have spoken to will surely not tender their shares at €24,” said Wolfgang Fickus, an analyst at WestLB.
Shares in Tognum rose to €24.86 on Wednesday, the day before the engine maker was expected to reveal its full-year results. The shares have risen by a third this week after the takeover plan was leaked.
Daimler and Rolls have set a low target of 50 per cent plus one share for the bid to come through. With Daimler adding its existing 28.4 per cent stake to the deal, the two partners will need less than 22 per cent of the shares to succeed.
Rolls will bring its Bergen gas and diesel engine unit into the joint venture, complementing Tognum’s spectrum of high-speed engines with medium-speed ones.
“With our combined strength, we are creating a powerful player ... that has great potential to grow and win market share,” Dieter Zetsche, Daimler’s chief executive, said.
In a cornerstone agreement with Tognum’s management, the potential buyers have pledged to invest €1bn over three years.