Volvo information of Scania and Volvo

At a meeting with the press on Thursday, Volvo's management presented information on the background for -- and objectives of -- proposed cooperation between Scania and Volvo. "We maintain that a closer relationship between Volvo and Scania would over the long term benefit the Swedish heavy-vehicle industry," said Leif Johansson, President and Chief Executive Officer of Volvo. "In a global industry such as that one, the benefits of large-scale operations increase in importance and the industry is accordingly in a consolidation phase, with a growing number of alliances and the formation of increasingly larger and more efficient units. The principal driving forces behind this trend are customers' increasing demands for quality and productivity, increasingly strict environmental legislation, new technologies, materials, drive lines and fuels, and new electronics and information technology. The industry faces a period of heavy demands on its resources. The costs of investments in new generations of products amount to double-digit billions of kronor. Volvo and Scania both have exceptionally strong brand names and today have strong and solidly profitable product programs. The market is firm. As a result, this is an appropriate time to begin a cooperation that does not have to be forced hastily or by a shortage of resources. Volvo's ambition has been to effect a merger with Scania is well known. However, we have not been able to reach an agreement with Scania's principal owner, Investor, with respect to a valuation of the company. But opportunities for gains resulting from coordination of certain of our operations and Scania's remain but in lesser extent. We have therefore made a proposal to Scania and Investor to explore the forms for future cooperation." "The proposal involves working out during 1999 a cooperation agreement to develop synergies and the competitiveness of both companies. The intention is that these synergies should be developed in so-called "precompetitive stages - - in noncompetitive areas. It is intended that the agreement be long-term. We estimate that such a cooperation could reduce yearly costs by up to 1 billion SKR within i three year periodIt is foreseen that forms of cooperation and decision-making structures can be developed in a manner that will achieve synergies without bringing into question the identities and independence of the companies. "This proposal has not yet occasioned any formal reaction from Scania or Investor. However, I am convinced that when the dust has settled Scania will not decline the opportunity to conduct a dialog with respect to the matters noted above. I also think that it is important for our respective companies to have a "quiet period." An orderly dialog would benefit both of us and would also help to end the wave of speculation about ownership matters that has characterized the spring." As regards Volvo's acquisition of more than 20 percent of Scania's shares, Leif Johansson says: "We have the greatest respect for Scania and our ambition is to strengthen relations between the two companies. It therefore appeared commercially sound and completely natural to take advantage of the opportunity that was offered to acquire an ownership interest of more than 20 percent at a reasonable cost -- and thereby the opportunity to report Scania as an associated company. With this percentage of ownership we have signaled the seriousness of our interest." On Friday, April 30, Volvo announced that its holding in Scania amounted to 20.04% of the voting rights and 20.94% of the share capital. However, as a result of transactions completed during the holidays, Volvo acquired an additional 161,458 Series A shares and an additional 990,000 Series B shares. Volvo's holding in Scania thereby amounts to 20.3% of the voting rights and 21.6% of the share capital. May 6, 1999 ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1999/05/06/19990506BIT00410/bit0001.doc http://www.bit.se/bitonline/1999/05/06/19990506BIT00410/bit0002.pdf