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BMW Buys 15% SGL Stake to Confront VW’s Carbon Fiber Ambitions

Bayerische Motoren Werke AG secured a 15 percent stake in SGL Carbon SE, adding to a 29 percent holding controlled by BMW heiress Susanne Klatten, in a move that keeps rival Volkswagen AG at bay.

BMW bought 5.2 percent of the shares directly and controls an additional 10 percent of SGL through financial derivatives, the Wiesbaden, Germany-based maker of carbon and graphite products said today. SGL, which will supply carbon fiber for BMW’s upcoming line of city cars, surged as much as 7.8 percent, valuing the stake at 474 million euros ($641 million).

“It appears the strategic importance of future lightweight materials is too significant in order to allow a major competitor potentially taking control,” said Arndt Ellinghorst, an analyst with Credit Suisse in London.

Volkswagen is the parent of Audi, which aims to surpass BMW as the world’s largest maker of luxury vehicles by 2015. The company announced it bought an 8.2 percent stake in SGL in March. Klatten increased her holding to a blocking minority in May. The BMW holding is separate, allowing BMW and Klatten to avoid making a mandatory takeover offer.

Klatten is a member of the Quandt family, which owns 47 percent of BMW. She controls her stake through investment vehicle Skion GmbH and the “holding is legally separate from BMW’s with no pooling agreement in place or planned,” Klatten spokesman Joerg Appelhans said.

No Board Seat

SGL rose as much as 3.35 euros to 46.50 and was up 2.7 percent to 44.30 euros at 3:17 p.m. in Frankfurt trading. The shares have risen 64 percent this year, making them the best performer in Germany’s 50-member MDAX benchmark index for medium-sized companies. BMW fell 2 cents to 54.47 euros.

BMW, which declined to disclose financial details of the transaction, doesn’t plan to seek a seat on SGL’s board, it said today in a statement. The carmaker, which aims to launch the i3 electric city in 2013 based on a carbon-fiber frame, is “satisfied” with its holding in SGL and doesn’t rule out further purchases in the future, spokesman Mathias Schmidt said.

SGL and Munich-based BMW teamed up last year to build a $100 million carbon fiber plant in Washington state for BMW’s electric cars. SGL started making brake discs for carmakers including Porsche SE more than a decade ago.

Audi Advantage

By securing influence over SGL, BMW will wrest away Audi’s advantage in light-weight vehicles, based on the VW unit’s expertise in aluminum, said Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen in Germany.

“BMW achieved a lot with this move,” said Dudenhoeffer, “Light-weight technology will certainly be a decisive factor for the auto industry in the future.”

The materials maker also produces electrodes and cathodes for the metals industry as well as furnace linings, besides carbon fibers and composite materials for the automotive and aerospace industries. Automakers accounted for less than 5 percent of 2010 sales, spokesman Tino Fritsch said.

Pressure on carmakers to reduce weight to improve fuel consumption has increased interest in carbon fiber, which weighs 50 percent less than steel. Daimler AG established a joint venture with Japan’s Toray Industries Inc. to build parts for Mercedes-Benz vehicles.

“Lightweight construction will play an increasingly important role in the automobile industry in the future,” BMW Chief Financial Officer Friedrich Eichiner said in the statement. “Our stake-holding in the SGL Group is a logical step.”

SGL Chief Executive Officer Robert Koehler expects to generate “substantial” revenue with automotive and aviation industry clients starting in 2013. The company projects sales to automotive clients rising to 10 percent to 15 percent of total revenue in the coming years, Sueddeutsche Zeitung said May 30.

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