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Porsche Better Off Without Scania
Lionel Laurent, 01.06.09, 08:50 AM EST

The German automaker is right to do all it can to avoid buying the Swedish truckmaker.

Porsche is being told that if it wants Volkswagen to be its bride, it'll have to marry the carmaker's ugly sister too. Late Monday Porsche said it had increased its stake in Volkswagen to more than 50.0% to become its majority shareholder--under Swedish law, the German sportscar maker must now also make a takeover bid for Scania, the Swedish truck maker that VW controls.

But Porsche may manage to wriggle out of the situation: it said Tuesday that it would make the stingiest bid for Scania that it could muster, a wise move considering the horrors a takeover of the truck manufacturer would bring in the current environment.

Repeating that it had "no strategic interest" in Scania, Porsche (other-otc: PSEPF - news - people ) said that it would offer "the minimum price" as prescribed by Swedish law for the firm. This will be the average price of Scania's shares over the past 20 trading days, which analysts estimate to be at around 65 Swedish kronor ($8.19). This price is 18.8% below current trading levels, and is unlikely to get approval--exactly the way Porsche wants it.

Shares of Porsche advanced 1.9%, or 1.01 euros ($1.35), to 54.46 euros ($72.56), during afternoon trading in Frankfurt. The Swedish stock exchange was closed for a public holiday, but Scania's 'B' shares changed hands for 80 Swedish kronor ($10.07) at the close on Monday.

Although Porsche's creeping acquisition of Volkswagen (other-otc: VLKAY - news - people ) makes strategic sense, with obvious synergies from using the same ingredients to make cars at every end of the spectrum, Scania (other-otc: SVKBF - news - people ) specializes in the not-so-flexible trucks market. This means synergies are not quite as obvious, and the wider difficulties facing the automobile sector make it a risk not worth taking.

"Within a huge conglomerate, you are adding more cyclicality to your overall business," said Oliver Kammerer, an analyst with WestLB. "A nice business if you're in the upturn, but a downturn might enhance the problems."

Kammerer compared a potential Porsche-Scania tie-up with the aborted merger of Germany's Daimler (nyse: DAI - news - people ) and American automaker Chrysler, which ended up falling apart in 2007 when Daimler sold most of Chrysler to private-equity firm Cerberus Capital. (See "Take Chrysler. Please.") During the nine years the companies were together, Daimler failed to get much benefit from the American unit's unprofitable operations.

Porsche said Tuesday that its stake in Volkswagen now totaled 50.8%, and that passing the threshold of 50.0% required it to make an offer for Scania, which is 69.0% owned by VW. Porsche still does not have complete control of Volkswagen, thanks to a controversial German law requiring 80.0% shareholder approval for company decisions. The state of Lower Saxony holds a 20.3% stake in Volkswagen. .