But Apparently Daimler Was €1.5 Billion Short Of Fiat Valuation
Daimler May Well Be Back, But Might Only Want Iveco
Daimler was quick to deny the rumour that it was going to buy Fiat’s truck and farm equipment subsidiary when it is spun off early next year, but some investors found the idea intriguing and won’t be letting it die.
The Italian newspaper “La Repubblica” reported that Daimler had offered €9 billion for CNH, Iveco and its engine activities, but that Fiat had wanted €10.5 billion. These businesses will be spun off into Fiat Industrial in the New Year, leaving Fiat Auto on its own.
Daimler said it was not in talks with Fiat on CNH and Iveco, and declined to say any more.
Deutsche Bank’s Gaetan Toulemonde said in a report that the recent increase in the value of agricultural and construction equipment makers like CNH had pushed the asking price too high as farm prices advance, while Iveco’s prospects also looked good as the truck sector was about to rebound strongly. Toulemonde believed there were strong industrial synergies for Daimler in both these companies.
“This article highlights the enhanced strategic flexibility for Fiat in the new structure and the attractiveness of Fiat Industrial being active in structurally higher profitable areas,” Toulemonde said.
UBS analyst Philippe Houchois said Fiat’s decision to appoint separate CEOs for the spun off CNH and Iveco means their eventual separation is likely, and it would make sense for Daimler to seek out Iveco.
“The recent announcement that CNH and Iveco will retain separate CEOs and that there will not be a “group” CEO for Industrial, in our view supports conjecture that Fiat Industrial could be broken up. We believe there is significant scope for synergies between Iveco and Daimler Trucks, but CNH in our view does not fit with Daimler. We also believe that there may be limited support from Daimler investors for expansion into new industrial sectors,” Houchois said.
Other analysts reckoned that any outright purchase by Daimler of Iveco would be unlikely because of monopoly-laws concerns.
Partnership not takeover?
“Daimler might be interested in a partnership with the Italian conglomerate’s truck division. Daimler is already the world’s largest maker of heavy trucks, sold under the Mercedes brand as well as Freightliner in the United States and Fuso in Asia. Fiat’s Iveco unit might help Daimler expand in emerging markets like India, where the company’s vehicles are too expensive to sell in large numbers. An alliance with Iveco would be more likely than an outright acquisition, which would raise antitrust issues in Europe,” said one analyst who declined to be named.
Neil Winton – September 29, 2010