Schaeffler to Start Continental Merger in 2011 With All Assets
Schaeffler Group chief executive officer Juergen Geissinger. Photographer: Charles Crowell/Bloomberg
Schaeffler Group, Continental AG’s debt-laden majority shareholder, may begin a merger of the two companies at the end of next year that will keep all units intact, Chief Executive Officer Juergen Geissinger said.
“We’ll be ready for it in late 2011,” Geissinger told reporters in Munich last night. “At this time there are no considerations that any of our divisions would not be part” of a joint company, he added.
Schaeffler, based in Herzogenaurach, Germany, has about 12 billion euros ($15.6 billion) in debt from a hostile takeover in 2008 that left it with 75 percent of Continental’s shares. Schaeffler isn’t talking with any investors to take a stake in the company or buy Continental assets in exchange for debt relief, Geissinger said. That is “not a priority,” he said.
Geissinger said he expects sales at the world’s second- largest roller-bearing maker to grow more than 10 percent this year to over 8 billion euros. The closely held company’s 2010 operating margin will probably be higher than 10 percent compared with 5 percent last year, he said.
“Even when compared with Continental’s, those margins don’t look bad at all,” said Frank Schwope, an analyst at NordLB in Hanover who recommends buying Continental stock.
Continental fell 66 cents, or 1.3 percent, to 48.65 euros at the close of trading at 5L30 p.m. in Frankfurt. The stock has gained 33 percent this year, valuing the company at 9.7 billion euros.
Near Capacity
Most of Schaeffler’s factories are running near capacity as demand for the company’s engine components, clutches and transmission systems is set to balloon 20 percent in Asia this year with growth in China reaching 40 percent, the CEO said. Asia accounts for 25 percent of revenue, he said.
Schaeffler announced plans last week to invest 300 million euros in Asia over “the next few years” and build factories in China and India.
There is “no rush” to repay bank credit after the company in August extended its loans by as much as six years, Geissinger said, adding the company’s proceeds will be used for investments. Continental’s debt of 8.2 billion euros stems from buying Siemens AG’s VDO automotive-electronics division in 2007.
Schaeffler reorganized its structure on June 28, moving its auto and industrial-component operations, as well as its Continental stake and about 7 billion euros of its debt, into a new holding company. The new Schaeffler GmbH will be supervised by a 20-member supervisory board.
Continental, Europe’s second-biggest car-parts supplier, is tightening cooperation with its biggest shareholder on product development. The Hanover, Germany-based company has developed gasoline-engine turbochargers which Schaeffler will begin manufacturing later next year.
It’s “currently not necessary” for Schaeffler to sell Continental shares, Geissinger said. “No one has ever said we necessarily need 75 percent,” he added.
To contact the reporters on this story: Cornelius Rahn in Frankfurt at crahn2@bloomberg.net; Oliver Suess in Munich at osuess@bloomberg.net.
Rate These Stories
Rate this Page