Daimler AG and Rolls-Royce Group plc will launch a public tender offer for 100% of the share capital of Tognum AG, a supplier of engines, propulsion systems and components for off-highway applications such as marine, distributed power generation, offshore oil and gas, and defense. The public tender offer is intended to be carried out by a 50:50 joint venture company, which will comprise Tognum and Bergen, the gas and diesel medium-speed engine business from Rolls-Royce.
The markets in which the JV will operate are attractive and fast growing, especially in the developing economies, the two partners note.
Daimler and Rolls-Royce will offer Tognum shareholders € 24 per share in cash representing a total consideration of approximately €3.2 billion (US$4.4 billion). This represents a premium of around 30% above the XETRA closing price of Tognum shares on 4 March 2011, the last undisturbed trading day before the transaction was rumored in the markets, and a premium of around 22% above the weighted average price of Tognum shares over the three months before the announcement of the transaction. Daimler holds a 28.4% stake in Tognum which will be tendered into the takeover offer at the offer price.
The joint venture allows Daimler to further enhance its shareholding in Tognum. With its engineering and technology competence, Daimler will be a partner in research and development to develop engine systems and make a contribution to the efforts to meet ever more stringent emission standards. In addition, Tognum will also benefit from leveraging Daimler’s strong global network. Daimler will secure its business relationship with Tognum as an engine supplier and will also continue to add to the Tognum product range with its diesel engines, thus further bolstering its business relationship with Tognum.
Rolls-Royce will contribute its medium speed reciprocating engine business which trades under the Bergen brand name to operate within the new joint venture company. The portfolio includes diesel and gas powered reciprocating engines which address the marine propulsion and auxiliary power markets. Rolls-Royce also brings a proven capability to deliver complex integrated systems and solutions in these growing markets where customers increasingly require a total solution approach.
The offer will be made subject to clearance by appropriate merger control authorities and achievement of a minimum acceptance threshold of at least 50% plus 1 share (including the 28.4% stake in Tognum to be tendered by the Daimler subsidiary) of the currently issued share capital of Tognum. In addition, the offer will be made on and subject to the terms and conditions to be set out in the offer document.
The shareholder agreement entered into by Daimler and Rolls-Royce contains exit provisions allowing either party to exit the joint venture under certain circumstances, including in the event of a change of control or insolvency of the other partner. Depending on the triggering event, these provisions provide each of the parties the right to exit at cost or fair market value of the venture, subject to any required regulatory consents or approvals. In addition, under certain circumstances,
Rolls-Royce could be required to acquire Daimler’s stake in the joint venture at cost subject to certain adjustments.