KKR, Bain and Allianz to Bid for Conti’s Tyre Unit

A group of three private equity firms are reportedly planning takeover offers for Continental AG’s tyre and rubber units. According to reports originating from the German Handelsblatt newspaper, Kohlberg Kravis Roberts, Bain Capital and Allianz Capital Partners are all preparing bids for the businesses. On 23 October, Bloomberg reported that financial investors were considering making offers for Continental AG’s tyre and rubber divisions. According to this report, the potential offers would value the company at 7 – 11 billion euros.

While there has so far been no independent verification of the reports published by Handelsblatt, they are definitely plausible. In 2006 Bain Capital made an offer for the German tyre and automotive supplier, but was rebuffed. This was followed by reports that General Capital, Goldman Sachs, Permira and KKR would join forces to attempt a purchase. This means two of three potential bidders named by news reports were previously prepared to bid for Continental in 2006 when the group’s share price peaked at a level almost three times higher than it is today.

Speculation that divestitures were on the horizon began almost as soon as the initial takeover bid became apparent in July. However, rumours gained momentum on 8 October when it emerged that Continental executives had already mandated Perella Weinberg to look into the possibility of a sale. At the time, the Financial Times Deutschland reported that Continental’s move was: “less a question of selling it than of finding possible partnerships.” However, the latest reports appear to contradict this.

The break-up of the so-called new Continental that executives and managers worked so hard to build would also contradict Schaeffler’s repeated assurances that it never intended to do this. In fact, the assurance that the group would remain intact became a key part of the Schaeffler group’s persuasion of various board members this summer. However, Handelsblatt points out the agreement Schaeffler finally made left room for Continental’s management to make this decision itself. Throughout the takeover battle, then CEO Manfred Wennemer led a series of defensive manoeuvres designed to stave off this kind of break-up. Now that he has been replaced by automotive electronics specialist Dr Karl-Thomas Neumann, there doesn’t appear to be any key leadership figure representing the “defensive” perspective.

Current chief executive Karl-Thomas Neumann, is expected to inform Continental AG’s supervisory board about the equity houses’ bids today (Monday 27 October).