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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 Now that he has been replaced by automotive electronics specialist Dr Karl-Thomas Neumann, there doesn’t appear to be any key leadership figure representing the “defensive” perspective.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).

27th October 2008/by Tyrepress Editors

Schaeffler May Sell a Quarter of Conti

The German Schaeffler Group, which currently owns 90 per cent of Continental AG, may sell up to a quarter of the tyre and automotive supplier to investors in order to lift the financial burden of its so-called stealth takeover. Quoting unnamed bankers, Sueddeutsche Zeitung reported that the Schaeffler family is facing “increasing pressure from six banks” to change the terms of the company’s funding after Conti shares fell to less than 40 euros.

24th October 2008/by Tyrepress Editors

General Motors May Sell ACDelco Parts Business

General Motors is ‘exploring a potential sale’ of its ACDelco aftermarket parts business. In a press release published October 22, the automotive giant stated that a possible sale of ACDelco, along with the potential sale of its Hummer brand and the company’s technical and manufacturing centre in Strasbourg, France, were part of a wider range of initiatives aimed at bolstering GM’s financial liquidity by approximately US$15 billion by the end of 2009. It is thought that the sale of ACDelco alone could be worth as much as $4 billion to the company.

24th October 2008/by Tyrepress Editors

HiQ Names Suffolk, Essex and South Wales Franchisees

HiQ has named the franchisees it has appointed to the tyre retail chain has appointed to its Suffolk, Essex and South Wales business zones. Phil Cowell and Robert Brown – with more than 70 years combined experience in the industry – have purchased the Essex and Suffolk zone of HiQ centres and now own outlets in Chingford, Grays, Ipswich, Wood Green and Bury St. Edmunds.

And Darren Haszczyn is the owner of the company’s South Wales zone, which incorporates centres in Llanelli, Cardiff, Chepstow, Hereford and Ludlow. Haszczyn, who has 22 years of experience in the trade, will run the centres with business partner Stefan Quinn, who boasts 30 years of tyre trade knowledge.

23rd October 2008/by Tyrepress Editors

Cooper to Conduct US Capacity Study

On October 21 Cooper Tire & Rubber announced plans to conduct a capacity study of its United States manufacturing facilities over the following ninety days. The study will determine how to optimise manufacturing capacity in relation to developing market and customer needs, and the company says it will likely result in restructuring, including capacity consolidation or geographical shifts to production.

22nd October 2008/by Tyrepress Editors

Kim Wilde Backs Waste Tyre Playground Campaign

Kim Wilde is backing Dunweedin’s nationwide playground regeneration project. The company is donating 100 tonnes of its eco-friendly playground chippings, made from 100 per cent recycled tyres, to help create vibrant play areas that are safe for youngsters.

22nd October 2008/by Tyrepress Editors

Michelin to Increase Capacity in Romania

Production capacity at Michelin’s facilities in Romania will be expanded in order to make the country’s operations a strategic centre for the supply of tyres to Southeast Europe. Bucharest based daily newspaper Curierul National quotes Michelin co-managing partner Didier Miraton as stating “Romania is important to us and we intend to produce more, to turn the factories that we have there into a strategic point for South-Eastern Europe, through which we will provide tyres to the countries in the region.” Specific details of the intended capacity or the value of Michelin’s investment in the expansion were not given.

20th October 2008/by Tyrepress Editors

Indian Production Rises as Exports Fall in August

Indian tyre manufacturers have seen production across all segments rise five per cent (6,990,767) on August 2007 (6,674,269), while the numbers for the first five months of the new financial year yielded an eight per cent gain on the average monthly production (7,059,732) against the same period in 2007, say figures released by the Automotive Tyre Manufacturers’ Association. The same could not be said for exports, where the cross-segment figure for August ’08 dropped considerably by 12 per cent from 535,325 to 473,444.

A particular highlight of the collected statistics is the action of the Tractor segment in August. Exports fell by 71 and 41 per cent respectively in front and rear categories compared to the monthly figures for 2007, though at the same time production in these sections rose 18 and 103 per cent. As these proportions suggest, the numbers for rear Tractor tyre production are particularly striking, going from 100,676 to 204,118 for August YOY. In terms of average monthly production between April and August 2008, front and rear Tractor tyres have increased in numbers by 10 and 30 per cent compared to the same five months in 2007. Looking at export figures, these segments have also witnessed an average month-on-month decrease of 41 and 17 per cent respectively in the same period.

20th October 2008/by Tyrepress Editors

Mood of N.A. Consumers Fall to New Lows

Current economic conditions have seriously shaken the confidence of North American consumers. Last week, the Reuters/University of Michigan Surveys of Consumers said its index of confidence plummeted to 57.5 in October from 70.3 in September – its steepest monthly drop ever. The index’s all-time low was 51.7, which it hit in May 1980; it is now at its lowest point since June. “All of the prior double-digit declines were based on severe economic dislocations with the losses accelerated by fear and panic,” the report said.

Canadian consumer confidence also fell in October, reaching the lowest level in more than 25 years, according to the Conference Board of Canada’s consumer confidence index also released last week. The Board’s index fell to 73.9, the lowest level since the third quarter of 1982 during the height of the early 1980s downturn. “The global credit crunch and major stock market declines clearly had an effect on consumer confidence,” said Pedro Antunes, the board’s director of national and provincial forecasts. “Consumers felt that they would be worse off in six months, indicating concerns that the financial crisis would not be resolved quickly.” (Tire Review/Akron)

20th October 2008/by Tyrepress Editors

Darren Wells Named Goodyear CFO

On October 17 Goodyear announced that W. Mark Schmitz, executive vice president and chief financial officer, has elected to leave the company to ‘pursue other interests’. Replacing him as CFO, effective immediately, is Darren R. Wells, previously senior vice president of finance and strategy. This announcement was made by Goodyear chairman and chief executive officer Robert J. Keegan.

Schmitz, 57, held the position of CFO for 14 months. Wells, 42, is considered by Goodyear to be of the key leaders and architects of the company’s financial restructuring since joining the company from Visteon Corp. six years ago as Goodyear’s vice president and treasurer. Wells was promoted to senior vice president business development and treasurer in May 2005, and to his most recent position in March 2007.

17th October 2008/by Tyrepress Editors

Schaeffler Buys More Conti Shares

Schaeffler Group today bought a further batch of stock already under its control in an effort to reduce the cost of the deal Continental takeover deal. It was the fourth time Schaeffler has done this. The group reportedly bought 1.05 million shares yesterday.

According to Bloomberg, Schaeffler has bought 3.17 million tendered Continental shares since the company’s offer expired on 16 September – equal to roughly 2.43 per cent. The average price paid was about 61.50 euros, which would amount to a savings of almost 43 million euros ($58 million) versus the price due under the offer. Schaeffler spokesperson Detlef Sieverdingbeck said the recent move is not likely to be the last purchase: “If further purchases make financial sense, we will continue to buy.”

16th October 2008/by Tyrepress Editors

Tyre Companies are Prime Takeover Territory

A new report is suggesting that the effects of the wider financial meltdown are going to result in a series of takeovers and sell offs that will “sweep the market.” According to the Plimsoll Publishing report, a combination of needs is forcing smaller companies to consider selling to their larger rivals and larger players are looking to buy their smaller rivals to diversify and develop their businesses.

“It has a great deal to do with necessity. Many of the larger players in the market, despite the downturn, are desperate to find new ways to develop their business, but with the current climate, costs are being cut and business development is being slashed. So they need options to help them protect their futures and tap into exiting revenue and profit streams. Financing a series of small acquisitions at key niche players in the market will give them: a quick route to increasing sales for relevantly low cost; and a foothold in the emerging sectors of the market,” senior analysts David Patterson commented.

14th October 2008/by Tyrepress Editors

Credit Crunch Puts Brakes on Schaeffler/Continental Deal

The credit crunch appears to be taking a bite out of the biggest takeover in the tyre world this year. According to various news reports, syndication of the 16.1 billion euro ($21.92 billion) loan behind Schaeffler Group’s bid for Continental AG is “on hold” because of the recent turbulence in credit markets. Unnamed bankers close to the deal told Reuters the loan had been paused while Schaeffler assessed its position. Syndication of the loan is expected to resume when there was clarification of Schaeffler’s strategy, the bankers said.

Later reports quoted a Schaeffler spokesman as saying the company has binding financing commitments from six banks on the deal.

14th October 2008/by Tyrepress Editors

Costs, Prices Continue to Rise for Apollo

Onkar Kanwar, the managing director and chairman of India’s Apollo Tyres, has stated to news sources that the company expects to make another price increase in Q3 of the company’s current financial year (1 April 2008 – 31 March 2009), based on the continuing rise of costs.

“The cost is up and we have to push up the prices,” Onkar Kanwar told journalists, responding, “It is possible,” when asked whether prices will go up in Q3.

In Friday trading the company topped the Bombay Stock Exchange bulk deals table when Kotak Mahindra UK Ac Sandstone Capital India Master Fund bought 8,405,530 shares at 33.25 rupees a share and Morgan Stanley Mauritius Company sold 8,405,530 shares at 33.25 rupees a share.

13th October 2008/by Tyrepress Editors

Tyresure First UK TPMS Provider to Join TyreSafe

UK Tyre Pressure Monitoring Systems provider Tyresure has joined TyreSafe, the non-profit making organisation set up in 1992 with the responsibility of raising the awareness of the dangers of defective and worn tyres. As such, Tyresure is the first UK TPMS manufacturer to join forces with TyreSafe, and the company’s technology offers an obvious synergy with TyreSafe’s message of safety through correct tyre pressure.

On announcing the partnership, Tyresure UK managing director, Ian Smith looked happy to be part of the TyreSafe team. “’We’re delighted to augment TyreSafe’s message and be part of the push to educate the public into safer driving. Human nature being what it is, we know that this sound advice often falls on deaf ears, with people still rarely checking their tyre pressures. Tyresure does it for you, meaning that once you have set your tyres to the correct pressures, it’s impossible to encounter a problem without getting both a visual and audible warning. It’s hopefully something that even the most apathetic driver can do to make themselves safer.”

10th October 2008/by Tyrepress Editors