Schaeffler Holding and Schaeffler AG have announced that the companies have placed roughly 4 per cent of Continental shares with a range of investors. According to a statement issued by Schaeffler group, net proceeds will be used to pay down debt as well as additional reduction of debt from excess cash flow. However, the company re-affirmed that Continental AG remains a long-term strategic shareholding.
Pirelli will gain a controlling share of the Kirov and Voronezh tyre factories in Russia by increasing its stake in the joint venture it operates with Russian corporation Rostec and financial group GHP. The tyre maker will repurchase from GHP 15 per cent of shares from the package that used to belong to Fleming Family & Partners, thus increasing its share to 65 per cent.
According to a report from DB Equity Research Automotive, Continental’s majority shareholder has sold 21 million Conti shares at a market price of 81.50 euros each and is using the proceeds to cut its debt by 1.6 billion euros, bringing its debt down to 10.6 billion euros.
India’s government is seeking proposals for divesting the Tyre Corporation of India Limited (TCIL) through an outright sale. In a document released through the Department of Disinvestment, a part of the country’s Ministry of Finance, the Indian government stated it has “decided to disinvest 100 per cent equity shareholding held by it in TCIL through outright sale” and reported that it “proposes to engage the services of an advisor to advise and manage the outright sale process successfully.” To achieve this divestment of its Rs 296.3 million (£3.3 million) equity in TCIL, the Indian government has called for tender submissions from merchant and investment bankers, consulting firms and financial institutions with experience in this type of transaction. The deadline for submissions is 12 December 2011.
Almost 20 years ago, Harshad Mehta achieved infamy in India through an engineered rise in the Bombay Stock Exchange that became known as the ‘securities scam’. After the stock broker’s activities came to light in mid-1992, a number of Mehta’s assets were sold off as part of court proceedings. This sale included 5,488,850 shares in Apollo Tyres, equal to 15.1 per cent of the company’s equity, which were purchased by Apollo and its managing family the Kanwars in April 2003. Now the Supreme Court in New Delhi has ordered Apollo Tyres to return a portion of these acquired shares to the Mehta family custodian. A two-judge Supreme Court bench accepted in part the appeal of Ashwin Mehta, brother of Harshad Mehta (who died in 2002) challenging the Mumbai Special Court’s 2001 order that allowed the sale of bulk holding shares back to Apollo Tyres.
Russian billionaire Leonid Mikhelson has reportedly concluded a full takeover of Russia’s Sibur Holding.
According to various new reports, Mikhelson upped his stake in Sibur from 50 to 57.5 per cent through his investment firm Dellawood Holdings. His partner in Cyprus-based Dellawood Gennady Timchenko is also said to have acquired a 37.5 per cent shareholding in the petrochemicals group. The remaining 5% stake is held by Sibur’s top management.
Reuters reports have suggested that Continental will issue 1.5 billion euros’ worth of new shares before the end of the year in an attempt to “increase capital,” according to one unnamed source. Schaeffler had initially opposed the plan, since it will reduce the proportion of its shareholding in the company from approximately 90 per cent to 66 per cent. However, in light of a 10 billion euro debt incurred when Conti purchased VDO from Siemens, in addition to its own dedt-pile, Schaeffler now says that the company must “repair its balance sheet” before a merger takes place. The next supervisory board meeting, postponed by Continental until mid-October according to Reuters, could be interesting (see also ‘Schaeffler to Propose Prof Dr Ing Reitzle as Supervisory Chair’).
Continental AG chief executive, Dr Karl-Thomas Neumann, has reportedly written to the Schaeffler Group’s family owners alleging Schaeffler has tried to block the two companies’ merger with “incorrect assumptions about the company’s value and a reluctance to agree to key points.” According to the Financial Times, the letter alleged that Schaeffler’s banks had “communicated an unrealistic value of 12 billion euros (£10.325 billion; $17 billion) for the automotive supplier.
FT reports that Dr Neumann is now “heading for a showdown with Schaeffler at [the] supervisory board meeting next week, when he will push for a decision on several key points as a basis for a merger of the companies.” The financial newspaper described a proposal document Dr Neumann has presented to supervisory board members ahead of the meeting. In it he demands that the combined group strive toward an investment grade rating as quickly as possible: “From 2010, the group should have a maximum net debt of three times operating profit (earnings before interest, tax, depreciation and amortisation) and equity ratio of 25 per cent, the document says.”
Schaeffler Group, which holds a 90 per cent shareholding in Continental AG, has recruited investment bank Houlihan Lokey to advise it on restructuring its finances. “To restructure its finances along with finding a long-term overall solution the Schaeffler group is seeking the advice of a number of experts and has appointed investment bank Houlihan Lokey,” a company spokesman told Financial Times Deutschland.
Chinese state and private firms may take on a partial shareholding in debt laden Schaeffler AG. According to an article printed by German business magazine WirtschaftsWoche on June 27, the company has engaged in talks with several parties, including the Beijing city administration, regarding a share sale in order to bolster its short-term finances. Such a deal would give the Chinese access to the company’s know-how, technology and distribution channels, the magazine reported.
“We have always said that we would speak to potential investors,” a Schaeffler spokesman was quoted as saying.
Michelin has sold a portion of its shareholding in Apollo tyres for approximately Rs 500 million (£6.67 million). The French manufacturer, who held an 11 per cent share in Apollo, sold 3.3 per cent through open market sales. The company has held shares in Apollo Tyres since it acquired a 14.9 per cent stake in early 2004, a deal made at a time when a truck and bus radial joint venture between the two companies seemed likely. Despite the venture’s failure to get off the ground and the September 2005 announcement that Michelin would acquire Apollo’s share in the joint venture, Michelin maintained its stake in the Indian company.
In an effort to plug the 300 million euro financing hole that is holding up GM Europe crisis talks with the German government and potential buyers Magna and Fiat, the company’s European dealer association “Euroda” has renewed its offer of a shareholding in a future Opel/Vauxhall corporation.
“As mid-sized dealers, we’re ready to play our part in saving Opel. That is why we’re once again calling upon the federal government to take our offer of 500 million euros seriously. This is a historic chance for the automotive industry to let dealers and manufacturers work together to take entrepreneurial responsibility in shaping the future of Opel,” says Jaap Timmer, president of Euroda.
Two new senior appointments have been made at the Apollo Tyres’ owned companies Dunlop Zimbabwe and National Tyre Services (NTS). In a statement, Dunlop Tyres Group chief executive officer, Dr. Luis Ceneviz, said Mr. Kennedy Mandevani, who is currently Dunlop Zimbabwe managing director, will assume the position of group managing director for National Tyre Services. Mandevani’s portfolio will cover both NTS and Dunlop, said Ceneviz.
With its takeover offer acceptance period now over, and Schaeffler Group now in control of 48.32 per cent of Continental AG, the ball bearing maker is already talking of partnership pitches to vehicle manufacturers.
“This result is a great success for us. We have reached our target of gaining a strategic shareholding of more than 30 per cent in Continental AG. This means that talks can begin with Continental as soon as possible about cooperation projects to realize market opportunities for both companies by consolidating expertise in development and innovation.
The Schaeffler Group and the German trade unions IG Metall and IG BCE signed on August 22 a joint statement regarding guarantees for protecting the interests of employees. Both sides have now therefore complied what the Schaeffler Group refers to as ‘one of the most significant points of the investment agreement between Continental AG and Schaeffler KG’.
“We have always stressed that we wanted to achieve good results in the interests of Continental AG’s employees in order to dispel the anxieties and fears of the workforce”, explained Kurt Mirlach, executive vice president of Human Resources at the Schaeffler Group. These agreements are valid for an unlimited period and cannot be terminated before 2014.
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