Schaeffler Said to Face Shadow of Volkswagen in IPO Meetings

  • Company telling investors VW scandal will have little impact
  • Schaeffler going ahead with IPO, may set price range Monday

Auto parts supplier Schaeffler AG is fielding questions from investors over the scandal facing its biggest customer Volkswagen AG, a slowdown in China and the shift to hybrid vehicles, as it markets an initial public offering, according to people familiar with the matter.

Schaeffler announced IPO plans on Monday, days after VW admitted it cheated on federal air-pollution tests amid investigations by U.S. authorities, and as the carmaker’s shares fell 18.6 percent, dragging down auto stocks across Europe. Concerns over the impact of the scandal, as well as Chinese and global market volatility, could affect investor views on the IPO valuation, two of the people said, asking not to be named as the details aren’t public.

The company is planning to set a price range for the IPO as soon as Monday as it crisscrosses Europe to market the shares to investors from London to Zurich, the people said.

Schaeffler is telling investors that its products aren’t involved in the VW scandal and any decline in VW car production will have an insignificant impact on sales, according to two of the people. The automotive supplier is also saying that it’ll benefit from the shift to hybrid and more efficient gas vehicles, because its products help meet higher technology demands, they said.

Unlike other issuers in Europe, which typically follow a four-week process from IPO announcement to listing and allow analysts to publish research, Schaeffler planned an expedited two-week sale. Initial trading is targeted for Oct. 5, the company said in a presentation the day it announced its IPO.

Volatility in the financial markets is also affecting other companies’ sale plans. Bayer AG’s Covestro plastics unit, which opened its 2.5 billion-euro IPO to investors on Monday, has yet to find demand for all the shares on offer, according to people familiar with the matter. The demand that has come in is toward the low end of the price range, the people said.

A spokesman for Bayer declined to comment on the Covestro sale process. The subscription period for the IPO will end on Oct. 1.

Schaeffler’s IPO could raise as much as 3 billion euros ($3.4 billion), people familiar with the matter said on Monday. A successful share sale would advance Schaeffler’s turnaround after the global financial crisis, which weighed on the manufacturer as it made a takeover bid for German car-parts maker Continental AG in 2008. Schaeffler’s net debt stood at 6.24 billion euros at the end of the first half, accumulated mainly from becoming the biggest shareholder in Continental.

A representative for Schaeffler declined to comment.

Emissions Tests

The entire auto industry and the methods used for testing vehicles are coming under scrutiny following revelations that VW’s “clean diesel” cars have software intended to defeat emissions tests. The European Union urged all 28 members on Sept. 24 to start their own investigations, with Germany, Italy, France and the U.K. among countries in the region to already do so. Japan, India and South Korea have also announced probes into the matter.

Schaeffler, based in Herzogenaurach in southern Germany, posted a 4.9 percent increase in revenue at constant currency rates in the first half, to 6.7 billion euros. Business this summer was weaker than expected, especially automotive in China, and sales for the full year probably will increase 4 percent to 5 percent at constant exchange rates, the company said.

While Schaeffler’s automotive business has been impacted by the slowdown in China, an increase in the industrials business in the region is offsetting the decline, the company is telling investors, according to one of the people. China’s benchmark share index has stabilized during September after falling 14 percent and 12 percent respectively in the previous two months.

Schaeffler, which competes with SKF AB of Sweden and Timken Co.
in the U.S., plans to list a stake of about 25 percent in Frankfurt by selling as many as 166 million new and existing shares, it said in a statement on Sept. 21.

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