Tata could even squeeze out shareholders to acquire 100% of Iveco

The takeover of Iveco Group, Europe’s fourth-largest commercial vehicle manufacturer, has entered the home straight: following the spin-off of the defence business in the spring, one of the basic conditions of the transaction, India’s Tata Motors has since obtained all the regulatory and competition approvals required to close the acquisition, meaning that the change in ownership of the Italian commercial vehicle manufacturer can now actually begin. As the next step in the approximately €3.8 billion takeover announced last summer, the acceptance period for the public tender offer to Iveco shareholders will open on September 7, with the ultimate aim of bringing the entire company under Tata ownership and subsequently delisting it from the stock exchange.

Under the public tender offer, which opens on September 7 and runs until October 26, Tata will pay €14.10 in cash per share for Iveco’s ordinary shares. The offer is unanimously supported by Iveco’s board of directors, which also recommends that shareholders accept it. A key factor in the transaction is that Iveco Group’s current largest shareholder, Exor N.V. – the investment holding company of the Agnelli–Elkann family, through which the family effectively also exercises ownership control over Iveco – has already given an irrevocable undertaking to support the acquisition and tender its entire 27.06% shareholding to Tata. This stake represents 43.19% of Iveco’s voting rights, so Exor’s support essentially provides Tata with the most important ownership backing needed to carry out the transaction. Exor has also undertaken to vote in favour of the resolutions required to implement the transaction at the extraordinary general meeting on October 16.

Tata’s objective, however, is not simply to acquire a majority stake, but to take over 100% of Iveco Group and then delist the company from the Milan stock exchange. Under the base-case scenario, it must acquire at least 95% of the ordinary shares to do so. If this is achieved, Tata may launch statutory squeeze-out proceedings against the remaining minority shareholders under Dutch law – Iveco Group N.V. is a company registered in the Netherlands. The remaining shares would be bought out in cash, with their fair value ultimately to be determined by the Enterprise Chamber of the Amsterdam Court of Appeal.

The structure, however, also includes a solution for the event that Tata does not reach the 95% threshold. If the extraordinary general meeting on October 16 approves the resolution required for this, the minimum acceptance threshold will automatically fall to 80%. If Tata acquires a stake of between 80% and 95%, a dedicated legal structure designed specifically for this situation may come into effect. Under this arrangement, essentially all of Iveco Group’s business activities, assets, liabilities and legal relationships would be transferred to a separate company, Iveco Sub, leaving virtually no operating business in the current Iveco Group N.V. Tata would then acquire all shares in Iveco Sub, meaning that Iveco’s actual operating group would come entirely under the ownership of the Indian manufacturer. The original, listed Iveco Group N.V. would then be liquidated, and the minority shareholders remaining in it would be paid out as part of the liquidation proceedings. The structure therefore enables Tata to acquire Iveco’s entire operating business and ultimately end its stock-market presence even if it fails to reach the traditional 95% squeeze-out threshold during the public tender offer.

At the same time, the change of ownership will not – at least in the initial period – mean the organisational integration of Iveco Group and its subsidiaries into Tata Motors. Under the agreement, Iveco and its subsidiaries will retain their own operating and reporting structures, and the group will continue to be managed by Iveco’s board of directors. The company’s headquarters will remain in Turin, and Tata has also undertaken to preserve Iveco’s corporate identity as well as its key brands, trademarks and logos.

This also affects the bus business: following the spin-off of the defence division, Iveco Group’s five main brands are Iveco, FPT, Iveco Bus, Heuliez and Iveco Capital, meaning that Iveco Bus and Heuliez will also remain part of the group to be acquired by Tata. The transformed Iveco Group employs around 33,000 people worldwide and operates 16 industrial sites and 22 research and development centres. As a direct consequence of the change of ownership, there will be no changes to production sites or existing customer contracts – including contracts with transport authorities – and Tata is not planning any workforce reductions.

It is important, however, that these undertakings are limited in time: Tata has committed itself to the guarantees set out in the agreement for only two years after the closing of the transaction. Compliance with them will be overseen by two independent members of Iveco’s board of directors, but the new owner has not undertaken to maintain them unchanged after the two-year period expires.