Schaeffler Likely to Take Control of Continental AG in 2010

Schaeffler Group is likely to wait until 2010 before it takes full control of Continental AG, German radio station NDR1 reported on 16 July. The report, which didn’t cite any sources, suggests that Schaeffler will wait until the lion’s share of the loan arrangement Conti racked up to finance the Siemens VDO acquisition expires. According to the report, this would also mean Schaeffler would have to re-negotiate conditions before the loans expire, and in the current conditions would not get such a good deal.

The German radio report was aired the same day that financial analysts at MorganStanley published an investor note suggesting “a takeover bid meant to fail could push the share price higher for the next 30 days.” The MorganStanley analysts point out that, in their opinion, a full takeover of Conti does not appear “financially feasible.” However, the takeover bid should clearly add strong support to the share price in the short term, the analysts conclude.

The most disputed part of Schaeffler’s takeover approach to date has been whether or not the company properly follow shareholding disclosure rules. Now, it appears that this may have prompted the German government to change reporting rules. According to a Reuters report, “if Schaeffler had used a legal loophole to covertly gain control over a 36 per cent stake in the tyres-to-brakes maker, the government would act rapidly to close it.” This could happen as soon as January 2009.