FRANKFURT/SAO PAULO – German Industrial conglomerate MAN AG announced its agreement to buy Volkswagen’s Brazil-based truck and bus business, enabling it to expand its previously small presence in South America.

It gave no purchase price for the business, which it is supposed to take over Jan. 1, but said it had an enterprise value of $1.58 billion.

Brazil is a crucial market for automakers, including Volkswagen AG, Italy’s Fiat SpA, and U.S.-based Ford Motor Co. Despite a downturn in recent months, the country’s truck sales were still up 27.1 percent in 2008 through November from a year ago, while output surged 26 percent.

MAN, which until now had a small presence in Latin America and a 50-million-euro a year business in Brazil producing diesel engines for shipyards, is betting growth will continue in the years ahead.

“This is a strategic decision. We want to be in this market,” MAN Chief Executive Hakan Samuelsson told a news conference in Sao Paulo. “We have to grow and Europe has limited potential.”

Trucks are the lifeblood of Brazil’s economy, Latin America’s largest. Because of Brazil’s lack of adequate railways and waterways, they move 60 percent of all goods in the country, from its massive agricultural output of soybeans and coffee to appliances, furniture, and electronics.

That compares with an average of 30 percent for developed economies and 42 percent in emerging markets, according to a study by Brazil’s development bank BNDES.

Samuelsson expects to open new markets for Brazilian truck exports and to introduce new products in the country. He estimates savings of 50 million euros a year from synergies starting in the third year after the takeover. 

The deal also marks movement toward a three-way truck deal that analysts expect to emerge among MAN, VW, and Scania AG. Volkswagen expected the transaction to close in the first quarter of 2009. The sale will allow it to focus on passenger cars and light commercial vehicles.

VW said its 29.9 percent stake in MAN would enable it and its shareholders to benefit from synergies the deal generates.

MAN shares slid 7.5 percent and Volkswagen firmed 0.3 percent, while the German blue-chip DAX index dipped 0.2 percent.

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