Schaeffler terminates Conti investment agreement

On 13 May, the Schaeffler Group gave notice of its intention to terminate the mutual investment agreement it has held with Continental AG since 2008. The agreement will terminate in May 2014.

Continental AG and the Schaeffler Group, together with its shareholders, entered into the investment agreement on 20 August 2008 with the involvement of former German Chancellor, Dr. Gerhard Schröder. The agreement governs the cooperative relationship between the two companies with respect to Schaeffler’s position as the largest single Continental AG shareholder. Schaeffler currently holds a 49.9 per cent share of Continental AG.

According to Schaeffler, the investment agreement “no longer has any practical relevance for either company” since “key provisions of the agreement expired in August 2012.” The Schaeffler Group adds that it and Continental have “benefitted from their excellent and pragmatic cooperation for years” and will continue this cooperation in the future.

“As Continental AG’s major shareholder, we are very pleased with Continental’s achievements over the past few years,” stated Schaeffler Group shareholders Maria-Elisabeth Schaeffler and Georg F.W. Schaeffler. “We consider our investment in Continental a long-term strategic investment aimed at sustainably increasing the value of Continental AG.” 

Comments made by Continental AG CEO Dr. Elmar Degenhart had perhaps a less enthusiastic ring to them. “Notice of termination of the investment agreement is understandable from the vantage point of Schaeffler, our anchor shareholder,” he said. “We are confident that the two companies will continue their very good and goal-oriented cooperation on into the future.” 

The Schaeffler Group paid 12.1 billion euros for a company five times its own size (by turnover) in a so-called stealth takeover in 2008, and at one stage either directly held or indirectly influenced 90 per cent of all Continental AG shares, despite committing to limit its holding to 49.99 per cent. Schaeffler borrowed 16 billion euros to finance its Continental acquisition, and within half a year was struggling to finance the high debt service payments it was committed to.