Volvo has taken a significant step towards replacing Daimler Chrysler as the world's largest heavy vehicle manufacturer after announcing a 7.5 billion Swedish kroner (€837 million) takeover bid for Nissan Diesel.

The offer of 540 Japanese Yen (€3.43) a share is supported by Nissan Diesel's board and represents a premium of 32 per cent to its average price over the past three months. The proposed deal comes as Volvo talks to China's Dongfeng Motor Group and Nissan Motor about investing in the heavy and medium-duty truck business that forms part of a joint venture between the two groups.

According to 2005 production figures, a group combining Volvo, Nissan Diesel and Dongfeng would replace Daimler Chrysler as the world's largest maker of heavy-duty trucks.

The bid answers many of the criticisms aimed at Volvo by activist investors in Sweden and institutional investors elsewhere, who accused the company of holding on to too much cash.

- (Financial Times service)