Sweden’s Volvo increases stake in German diesel engine maker Deutz to 25%

Swedish industrial group AB Volvo (STO:VOLVA; VOLVB) said Wednesday it had agreed to raise its stake in German diesel engine producer Deutz AG (ETR:DEZ) to over 25% from 6.7% through the acquisition of 22m shares for EUR5.88 (USD7.36) apiece.

The agreed price represents a premium of 12% over Deutz’ average price in the last three months. The transaction, subject to certain conditions and regulatory approval, will make the Swedish company Deutz biggest shareholder. It is due to close in the third quarter of the year without any impact on Volvo’s financial results.

This move will help Volvo to widen its cooperation with Deutz in the medium-duty engines, Volvo’s chief executive Olof Persson said. Earlier in 2012, the two companies inked a memorandum of understanding to study a potential expansion of their long-term partnership and develop the next generation of medium-duty engines for off-road applications. The MoU also envisages the possible set-up of a Chinese joint venture to manufacture medium-duty engines.

Volvo currently holds 8.097m shares in Deutz.

Koeln-based Deutz is active in the design and production of diesel engines for both on-road and off-road applications. It runs production sites, 10 distribution companies, nine sales offices and has more than 800 partners in over 130 countries worldwide.

Volvo supplies commercial transport solutions, including trucks, buses, construction equipment, engines and drive systems for boats and industrial applications, industrial engines and systems, industrial IT solutions, logistics solutions, aircraft engine components, as well as services and support. It has production facilities in 20 countries and sales facilities in over 190 markets.