Volkswagen Will Pay $2.5 Billion for 19.9% Stake in Japan's Suzuki Motor
Dec. 9 (Bloomberg) -- Volkswagen AG, Europe’s largestcarmaker, agreed to buy 19.9 percent of Suzuki Motor Corp. for222.5 billion yen ($2.5 billion) to boost its presence in India.
Suzuki, Japan’s fourth-biggest automaker, will spend asmuch as half of the amount it will receive from Volkswagen intoVW shares, Wolfsburg, Germany-based Volkswagen said in astatement today. The deal is subject to regulatory approval andwill probably be completed by January, the companies said.
The carmakers will focus on “achieving synergies” indeveloping and manufacturing energy-efficient small cars inemerging markets. Suzuki controls Maruti Suzuki India Ltd., themaker of half of the cars sold in India. VW is the second-biggest overseas automaker in China, which is set to surpass theU.S. as the world’s largest auto market this year.
“This is clearly the next step in going head to head withToyota,” said Christoph Stuermer, a Frankfurt-based automotiveanalyst with IHS Global Insight. The cross shareholding is a“very wise choice” because it allows Suzuki to “keep its face”while opening the door to Volkswagen, he said.
Volkswagen rose 1.68 euros, or 2.1 percent, to 80.57 eurosat 9:23 a.m. in Frankfurt, valuing the automaker at 30.4 billioneuros ($44.8 billion). Suzuki added 3.5 percent to close at2,370 yen in Tokyo before the announcement. Maruti Suzuki, thecarmaker 54.2 percent owned by Suzuki Motor, rose as much as 4.3percent in Mumbai.
‘Department Store’
Volkswagen and Suzuki have been discussing a partnershipsince June, a person familiar with the matter has said. Aninvestment by Volkswagen would pose a “serious threat” to theglobal dominance of Toyota Motor Corp., said Koji Endo, managingdirector of Advanced Research Japan in Tokyo.
“Volkswagen is like a department store carrying everythingfrom luxury brands to truckmakers,” Endo said. “What they’remissing is any presence in India and Southeast Asia. The pointof partnering with Suzuki is to grab India.”
Car sales in China surged 42 percent in the first 11 monthsof this year to 12.2 million. In India, passenger-car sales rose61 percent last month, the biggest gain in more than five years.
A decline in worldwide auto sales this year is promptingcarmakers to form alliances and shift investment to emergingmarkets, which have withstood the slump amid economic growth andgovernment subsidies. PSA Peugeot Citroen, Europe’s second-biggest carmaker, and Japan’s Mitsubishi Motors Corp. are intalks to deepen a strategic partnership that may involve anequity tie-up, the companies said last week.
Porsche Takeover
Volkswagen Supervisory Board Chairman Ferdinand Piech hassaid he wants to bolster the company with additional brands. Thecompany this week completed the purchase of a 49.9 percent stakein Porsche Automobil Holding SE’s carmaking unit.
“A Suzuki deal would be a bit more game-changing thanPorsche,” said Philippe Houchois, an analyst with UBS AG inLondon. In the Porsche transaction, “Volkswagen is paying fullprice in an area where it’s already strong -- Europe and luxurycars.”
Volkswagen Chief Executive Officer Martin Winterkorn has a10-year goal of increasing VW-brand deliveries by 80 percent to6.6 million vehicles by 2018. The manufacturer also wants toovertake Toyota, the world’s biggest carmaker, in globaldeliveries and profit margins by 2018.
Bentley, Skoda
To help finance its takeover of Porsche, VW, whose otherbrands include Audi, Skoda and Bentley, has shareholderauthorization to sell as many as 135 million preferred shares,valued at 8.7 billion euros at market price.
Michael Brendel, a spokesman at Volkswagen, said therehasn’t been a decision on whether Suzuki will acquire VW’sordinary shares or non-voting preferred stock.
Suzuki forecasts global sales of 2.3 million vehicles in thefiscal year ending March 31. Volkswagen said in October it maydeliver 6.2 million units in 2009. The combined figure exceedsToyota’s sales estimate of 7 million for the current fiscalyear.
Suzuki is known for its minicar models, including theWagonR and Carry vehicles, which are sold mainly in Japan, aswell as for its Swift hatchback and Jimny small sport-utilityvehicle.
GM Ties
The company began making cars in India in 1983 through apartnership with the government. Suzuki took a majority staketwo decades later, just before the venture, now called MarutiSuzuki India, was listed in Mumbai.
Suzuki has been cutting ties with General Motors Co., whichowned a 20 percent stake in the Japanese carmaker until 2006.Suzuki said Dec. 4 that it will sell its 50 percent stake in aCanadian joint venture to the Detroit auto company. GM firstinvested in Suzuki in 1981 and Suzuki completed a purchase ofits own shares from GM last year.
To contact the reporters on this story:Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net;Andreas Cremer in Berlin at acremer@bloomberg.net.
Last Updated: December 9, 2009 03:27 ESTSource: Bloomberg
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