Volkswagen has seen bids from Europe’s Innio, Japan’s Mitsubishi Heavy and U.S.-based Cummins for its MAN Energy Solutions, which makes diesel engines for ships and power generators, people knowledgeable with the matter stated.
Innio, previously known as Jenbacher and owned by buyout group Advent, along with the two other bidders last week made bids for the Volkswagen unit, which could have a valuation of 1.5-2 billion euros ($1.7-$2.2 billion) in a potential sale, they stated.
Other bidders including Hyundai Heavy are no longer in the running, they stated.
The divestment is part of Volkswagen’s efforts to trim down and simplify the group that has 12 brands, trucks, buses, motorbikes, cars and electric bicycles as part of its business.
While the automaker is not running an official auction process it is expected that the bidders may be asked to put final offers at the end of February, the sources stated.
Volkswagen, which has offered to retain a significant minority in the business, refused to refused. The bidders refused to discuss or had no immediate comment.
The company, earlier known as MAN Diesel & Turbo, also makes turbochargers used in the oil & gas industry and in the last year they reported operating earnings of 133 million euros on sales of 3.1 billion euros.
In 2019, MAN Energy Solutions is expected to post approximately 200 million euros in revenues before interest, tax, depreciation, and amortization, one of the people stated.
Cummins trades at 7.7 times its expected major earnings, whereas Caterpillar trades at 9.3 times and Wartsila trades at 9.8 times.
“MAN Energy Solution’s value has been in decline following years of years of underinvestment,” one of the sources stated, adding the industry’s margins have come under pressure as demand from power plants has waned with the transition to more renewable energy sources.
Peers often specialize in just part of the unit’s product range which consists of 2-stroke engines, 4-stroke engines, and turbochargers, limiting interest, the sources stated.
Volkswagen is having a hard time to trim down in the past after the company’s works council, which has veto powers over major restructuring, blocked attempts to sell motorbike brand Ducati.
MAN Energy Solutions was originally a part of Volkswagen’s trucks brand MAN, but some of MAN’s assets were shifted to Volkswagen last year as part of attempts to streamline Traton ahead of the unit’s listing.
