VW, Suzuki agree strategic tie-up
Thursday, 10 December 2009
FRANKFURT, Dec 9 (Reuters): Japan's Suzuki Motor said Wednesday it will sell a 19.9-per cent stake to Volkswagen for $2.5 billion and use half the proceeds to buy shares in the German automaker.
The following are comments from analysts and other market sources on the deal.
"The industrial logic seems clear, with Suzuki's strength in two of VW's weakest spots. Our main concern is that (VW) management may lose focus with three major transactions.
However, the structure of the deal seems appealing, with Suzuki investing 50 per cent of the proceeds from the sale of shares to VW back into VW."
"This is an interesting combination that comes with mutual benefits. Suzuki has a solid position in India and the same is true for Volkswagen in Europe.
"The combined entity is almost as big as Toyota. If Toyota stumbles, the No1 position will be there for them to grab, just as GM's stumble made Toyota the world's No1."
"The alliance between Volkswagen and Suzuki is positive for both companies from our point of view, as the potential for synergies is very promising. The two companies have a very complementary regional and product portfolio.
"VW is not paying any premium for the stake in Suzuki. Instead, it will get the stake in Suzuki at a 13 per cent discount to yesterday's closing price. This values Suzuki at less than 0.5x EV/Sales. Given the significant synergy potential this is in our view an attractive price."
"VW in total needs about two billion euros out of the planned capital increase in preference shares for the purchase of the Suzuki stake, of which Suzuki will sign one billion euros in our understanding. As a consequence, Suzuki won't have voting rights."
"This comes right after the Mitsubishi Motors deal and shows that foreign carmakers are coming to take stakes in Japanese firms, raising expectations of a reorganisation in the autos sector."
The following are comments from analysts and other market sources on the deal.
"The industrial logic seems clear, with Suzuki's strength in two of VW's weakest spots. Our main concern is that (VW) management may lose focus with three major transactions.
However, the structure of the deal seems appealing, with Suzuki investing 50 per cent of the proceeds from the sale of shares to VW back into VW."
"This is an interesting combination that comes with mutual benefits. Suzuki has a solid position in India and the same is true for Volkswagen in Europe.
"The combined entity is almost as big as Toyota. If Toyota stumbles, the No1 position will be there for them to grab, just as GM's stumble made Toyota the world's No1."
"The alliance between Volkswagen and Suzuki is positive for both companies from our point of view, as the potential for synergies is very promising. The two companies have a very complementary regional and product portfolio.
"VW is not paying any premium for the stake in Suzuki. Instead, it will get the stake in Suzuki at a 13 per cent discount to yesterday's closing price. This values Suzuki at less than 0.5x EV/Sales. Given the significant synergy potential this is in our view an attractive price."
"VW in total needs about two billion euros out of the planned capital increase in preference shares for the purchase of the Suzuki stake, of which Suzuki will sign one billion euros in our understanding. As a consequence, Suzuki won't have voting rights."
"This comes right after the Mitsubishi Motors deal and shows that foreign carmakers are coming to take stakes in Japanese firms, raising expectations of a reorganisation in the autos sector."