Continental Confirms Takeover ‘Conversation’ with Schaeffler

Continental AG has confirmed it has had “one brief conversation” about a possible engagement by Schaeffler-Group. Now the tyre and automotive supplier is said to be waiting for Schaeffler to substantiate its plans, before the management board of Continental evaluates these. The initial talks took place on Friday (11 July) afternoon. According to Continental AG, no further conversations took place.

The official statement appears to confirm a Financial Times (FT) report that Schaeffler had approached Continental about a takeover which could value Europe’s second biggest tyre company at more than 10 billion euros (5.8 billion). FT reports that Schaeffler generates 9 billion euros in revenues compared with Conti’s 26 billion euros.

Herzogenaurach, Germany-based Schaeffler is apparently aiming to take Continental private. One report, in the German daily Frankfurter Allgemeine Zeitung, said the company would consider spinning off the tyre business to help finance the transaction. However, a Continental spokesperson was swift to respond by saying the Hannover-based company would fight any hostile takeover: “In principle, our stand is that we have no reservations against investors who support our long-term strategy and our business policy and above all do not intend to break up Continental…Those who might want to launch a hostile takeover would need all the luck available because we will fight against it.”

Either way, “bid speculation is set to boost the shares,” Bloomberg quoted Thomas Nagel, a trader at Equinet AG in Frankfurt as saying.

Sourcing “people with knowledge of the deal,” FT explained that Schaeffler was primarily looking to engage with Continental, but was prepared to go hostile. The news that Schaeffler is courting Conti for a possible takeover follow Continental AG’s largest share price drop since 11 September 2001, on 11 July when share prices plummeted to €53.96. At the same time analysts, led by Merrill Lynch, cut their ratings for Continental.