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Conti’s Rearguard Action Takes Shape

As an increasing number of voices speak out in favour of the proposed Conti/Schaeffler merger, Continental AG executives have called in a number of high profile investment banks to advise it on how best to defend its position. The most recent addition to this team is Deutsche Bank, which joins Goldman Sachs and JPMorgan as advisors.

The strategy behind the defensive manoeuvre appears to have two key objectives: to wrest complete control out of the clutches of the rapidly advancing Schaeffler; and to raise the suitor’s bid. Germany’s Handelsblatt reported that Conti chief executive, Manfred Wennemer told board members 89.74 euros per share (roughly 30% higher than the Schaeffler’s current 70.12 euros per share bid) is a ‘fair market price,’ for the tyre and automotive supplier. Other sources quote board members as saying 90 to 100 euros a share would be better. Could this be the target level the defence team will be seeking to achieve? And if so, how can Conti defend its position?

29th July 2008/by Tyrepress Editors

Cooper to Sell 10.71% Kumho Share

Kumho Tires is looking for investors to acquire a £54.9 million share in itself currently owned by Cooper Tire & Rubber, reports a company spokesperson. The US based firm intends to sell the 10.71 per cent share it acquired in 2005 for 109.8 billion South Korean won.

Cooper has a right to sell the shares at 14,650 won per share, the spokesperson said, however Kumho shares are currently down 3.1 per cent, at 8,500 won. It is thought that Kumho will face difficulties finding investors.

29th July 2008/by Tyrepress Editors

Schaeffler Raises Conti Bid to 11.3 billion euros

Schaeffler Group has increased its bid for Continental AG to 11.3 billion (70.12 euros per share), compared with its previous bid of 11.2 billion euros (69.37 euros per share). The move brings the company’s offer in line with Continental’s average three-month share price as determined by German market regulator, Bafin. Following its investigation into Schaeffler’s so-called “creeping bid,” Bafin has reportedly decided against holding up the takeover.

Meanwhile, Conti’s defensive strategy has begun to play out, with chief executive Manfred Wennemer receiving the backing of some of the company’s largest shareholders. One German institutional investor with more than 1 per cent of the Conti told the Financial Times: “An offer must note Conti’s long-term value and include a control premium,” adding that the bidder would have to offer 100 euros a share.

22nd July 2008/by Tyrepress Editors

Continental Board ‘Split’ on Takeover

The Schaeffler Group’s 11.2 billion euro bid for Continental AG has led to significant unrest amongst board members. According to various news sources, a rift has developed between chairman Hubertus von Grünberg and other executives. Frankfurter Allgemeine Zeitung went as far as saying that CEO Manfred Wennemer would be willing to step down in order for management board member Dr Karl-Thomas Neumann to take his place. Continental’s press department denied that this was the case.

The dissension appears to centre on Hubertus von Grünberg’s criticism of senior executives’ confrontational way of refusing Schaeffler’s offer. According to the Finanacial Times, his argument is that Schaeffler has pretty much succeeded in its bid by getting control of 36 per cent of Conti shares and that too much of a struggle could result in the break up of the company.

21st July 2008/by Tyrepress Editors

Continental Rejects ‘Unlawful’ 11.2 billion Euro Schaeffler Takeover

Continental AG has sharply rejected a 69.37 euros per share (roughly 11.2 billion euros) cash takeover offer from Schaeffler Group, describing it as an “opportunistic approach [that] does not reflect the full value of the company.” Continental AG was officially informed by the Schaeffler Group about its decision to make a takeover offer for the company on Tuesday 14 July and hit out publicly a day later (Wednesday). In a company statement Continental said the offer has “no convincing strategic rationale for a business combination” and that “Schaeffler is trying to achieve control over Continental in an unlawful manner.”

For the first time Continental lent its support to claims that Schaeffler already indirectly controls roughly a third of the company: “According to our analysis, the Schaeffler Group has secured access to 36 per cent of the outstanding capital of Continental in an unlawful manner – with the help of derivative positions and collaborating banks. This would result in a comfortable voting majority at the shareholders meeting and may even lead to a qualified voting majority.” According to the Financial Times, Schaeffler holds 2.97 per cent of Continental’s stock directly and has amassed the right to own an additional 32.95 per cent stake through various options. All of which begs the question, how can Continental fight off what is rapidly becoming the largest hostile takeover bid in Europe this year?

Despite press speculation that the potential takeover may result in the divestment of the tyre business, Schaeffler Group President and CEO, Dr. Jürgen Geißinger said the group’s focus is on combining the strengths of the two companies: “Schaeffler expressly supports the strategy of Continental including its tyre business.” His statement continued: “Schaeffler will not break up Continental AG. The company will continue to be listed on the stock exchange and, if possible, remain in the DAX index. Continental will remain an independent company headquartered in Hanover. No jobs will be lost in conjunction with the transaction.”

16th July 2008/by Tyrepress Editors

Continental Confirms Takeover ‘Conversation’ with Schaeffler

Continental AG has confirmed it has had “one brief conversation” about a possible engagement by Schaeffler-Group. Now the tyre and automotive supplier is said to be waiting for Schaeffler to substantiate its plans, before the management board of Continental evaluates these. The initial talks took place on Friday (11 July) afternoon. According to Continental AG, no further conversations took place.

The official statement appears to confirm a Financial Times (FT) report that Schaeffler had approached Continental about a takeover which could value Europe’s second biggest tyre company at more than 10 billion euros (5.8 billion). FT reports that Schaeffler generates 9 billion euros in revenues compared with Conti’s 26 billion euros.

Herzogenaurach, Germany-based Schaeffler is apparently aiming to take Continental private. One report, in the German daily Frankfurter Allgemeine Zeitung, said the company would consider spinning off the tyre business to help finance the transaction. However, a Continental spokesperson was swift to respond by saying the Hannover-based company would fight any hostile takeover: “In principle, our stand is that we have no reservations against investors who support our long-term strategy and our business policy and above all do not intend to break up Continental…Those who might want to launch a hostile takeover would need all the luck available because we will fight against it.”

14th July 2008/by Tyrepress Editors

Continental Shares Plummet, Michelin’s drop

Shares in Continental AG have fallen by the most significant margin in seven years – 11 September 2001 – in Frankfurt, leading to the downgrading of the stock by Merrill Lynch. The decline of up to 8.1 per cent today, report financial news sources, sees the stock plummet to 53.65 euros. For the year, Continental’s stock is down 40 per cent, its value now down at 8.7 billion euros. The fall comes as a result of a variety of challenges to automotive stocks including the rapid ascent of raw materials costs and the decline in demand from traditional markets.

Concurrently, French competitor Michelin faced a similarly difficult day on the markets, with shares declining by 5.9 per cent in Paris. Overall, Bloomberg’s Europe Auto Parts & Equipment Index – including the two manufacturers – is down in 2008 by 31 per cent, having included the not inconsiderable hit from today’s declines for its two biggest members, being down 4 per cent for the day.

11th July 2008/by Tyrepress Editors

Indian Tyre Shares Boosted in Wake of Hikes

As promised, the price hikes across some of India’s premier tyre manufacturers have been implemented. JK Tyre raised its truck tyre prices by 6 per cent, while Ceat raised non-commercial vehicle tyres by the same quantity. Meanwhile, Apollo has raised prices across segments by 7 per cent.

Following the hikes, shares in each of the companies went up in value, JK Tyres the leaders with a rise of 1.86 percent, closing in Mumbai at 96.05 rupees.

10th July 2008/by Tyrepress Editors

Pirelli Complete Speed Acquisition

Financial news sources report that Pirelli have acquired the 19.19 per cent of Speed SpA necessary to complete the full purchase of the company.

Speed owns a 38.9 per cent stake in Pirelli – the only stake not already owned by the Italian manufacturer itself. The acquisition of Speed for the grand sum of 835.5 million euros – as announced back in March – therefore completes the repurchase of shares in Pirelli Tyre.

9th July 2008/by Tyrepress Editors

Analysts Downgrade Michelin Shares to Sell

Michelin shares have dropped by 6.44 per cent following Societe Generale SA’s decision to downgrade the leading French tyre manufacturer’s stock to ‘sell.’ Societe Generale had previously rated Michelin as “hold.”

According to the analysts, Clermont Ferrand-based Michelin is about to feel the pinch of slowing sales of new truck tyres in Europe: “The European market for new truck tyres will probably slow as of 2009, given the end of an equipment cycle as well as the clear deterioration in the economic climate.” According to Bloomberg, Michelin’s share price has fallen 43 per cent this year. Societe Generale estimates the tyre manufacturer’s share price may fall to 39 euros, a 17 euros drop in its previous price target of 56 euros.

8th July 2008/by Tyrepress Editors

Kumho Gets OE Deal from Ford

Its Solus KH16 radial in size 215/45R17 will be an OE tire on the 2009 Ford Focus. Kumho will be supplying some 200,000 of the tires to Ford in the deal.

“This contract is an important step for Kumho Tires; we now have supply contracts with all of the big three automakers in North America,” said Sae-chul Oh, president and CEO of Kumho Tire Inc. “These companies have recognized that Kumho Tires shares their commitment to quality, technology and performance. We will continue to expand our North American presence to become one of the top five global tire manufacturers by 2015.” (Tire Review/Akron)

7th July 2008/by Tyrepress Editors

Conti Increases Stake in Continental Matador

Continental has increased its share in Continental Matador Rubber following a July 1 agreement to transfer an additional 15 per cent of Continental Matador shares. Following the transaction the Continental Group holds 66 per cent of shares in Continental Matador Rubber.

3rd July 2008/by Tyrepress Editors

Sibur Buys Stock-Exchange Listed Amtel-Vredestein

What may appear to some a complicated transaction is actually very simple: The unlisted holding company Sibur Holding, having sold its Sibur Russian Tyre business to the stock-exchange listed Amtel-Vredestein and then acquired the majority of all outstanding Amtel-Vredestein shares, has been able to obtain a tyre business that remains registered with the London Stock Exchange.

2nd July 2008/by Tyrepress Editors

Amtel-Vredestein, Sibur Holding Deal will Create ‘Top 10 Tyre Producer’

Amtel-Vredestein has reached an agreement with Sibur Holding that will see it acquire Sibur Russian Tyres in exchange for 159.3 million new Amtel-Vredestein shares. Amtel-Vredestein will also carry out a $150 million share placement, and Sibur Holding has already agreed to acquire $50 million worth of these shares. As a result, Sibur Holding will own 70 per cent of the new expanded tyre operation. This deal, which values Sibur Russian Tyres at approximately US$318.6 million, promises to create “one of the leading diversified tyre producers in Europe and one of the top 10 tyre producers worldwide,” states Amtel-Vredestein.

The acquisition will give Amtel-Vredestein access to a $40 million line of funding from Sibur Russian Tyres. Media reports earlier in the year suggest Amtel needs roughly $20 million a month to keep raw materials flowing into the production process during the transition. As a result, the deal is expected to be completed in the second half of 2008.

Following the initial acquisition of Sibur Russian Tyres, the terms of the agreement call for Amtel-Vredestein to conduct a $150 million private share placement at a subscription price of not less than $1.89 per share. Sibur Holding has already agreed to purchase shares to the value of $50 million. Following a successful completion of this share issue, Sibur Holding will own 70 per cent of the new, larger tyre company and no less than 60.5 per cent of Amtel-Vredestein’s enlarged share capital as a result of the acquisition and placement. Sibur Russian Tyres chief executive Vadim Gurinov will head Amtel-Vredestein following the transaction.

Furthermore, Sibur Russian Tyres has agreed to provide Amtel-Vredestein with an interim funding facility of $40 million, subject to the agreement of the second company’s shareholders. The interim funding will be provided in two tranches; $20 million will be immediately available to Amtel-Vredestein upon signing a definitive agreement, and the balance available upon Amtel-Vredestein’s shareholders passing the required resolutions at the EGM. The amount raised through the interim funding is intended to enable Amtel-Vredestein to meet its liquidity requirements until completion of the acquisition and placement.

Amtel-Vredestein notes soberly that, in light of its difficult financial position, the transactions with Sibur Holding are “considered essential to the continued viability of Amtel-Vredestein as a going concern and, without the transactions, Amtel-Vredestein’s debt restructuring cannot succeed.”

“This is a significant achievement for Amtel-Vredestein and Sibur Russian Tyres and for their shareholders as well as all stakeholders,” commented Petr Zolotarev, CEO and chairman of the Amtel-Vredestein Executive Board. “The combination of the two businesses as well as the placement will provide the enlarged group with a stronger balance sheet and essential funding to continue operating as one of the leading global tyre manufacturers, creating at the same time one of the leading companies in the Russian market. Going forward, the enlarged group will benefit from greater economies of scale, enabling it to compete more efficiently. ”

Alexander Dyukov, chairman of the Boards of Sibur Holding and Sibur Russian Tyres, commented that “The transaction will create one of the top 10 tyre producers worldwide, and is in line with Sibur Holding’s strategy to increase the value of its tyre business.” Sibur Russian Tyres CEO Vadim Gurinov added “the Russian tyre market has a very high growth rate and the enlarged group will be very well positioned to benefit from the growth, finding itself in a win-win situation. In addition to leading positions in the truck and off-the-road tyre segments, the group gains the same positions in the passenger and light trucks tyre segments and becomes an undisputable market leader in Russia and the largest tyre manufacturer in Eastern Europe. Moreover, by this combination, we are able to reach additional synergies through acquiring an up-to-date research base, high-quality tyre brands and a wide European distribution network. From my point of view, this business combination provides us with great prospects and development opportunities.”

Russia’s economy is growing strongly, comments Amtel-Vredestein, adding that the enlarged group will be better positioned to benefit from this and compete effectively with foreign competitors. Furthermore, it states, “the parties are confident there is significant scope for realising synergies by combining the operations of the two companies in areas of manufacturing, research and development, administrative cost savings and a rationalisation of the capital investment programme.”

30th June 2008/by Tyrepress Editors

Goodyear Shares Slump

Following Goodyear’s announcements yesterday concerning the company’s closure of its Melbourne plant and its plans to invest further in Brazil and China and to refurbish four of its American facilities, NYSE shares in the organisation fell by a steep 11.2 per cent. The drop sees the company’s stocks fall to their lowest value since December 2006.

Reports suggest that the dip has been caused by a variety of factors compounded by the manufacturer’s strategic announcements. The decline in the market for replacement tyres, especially within the heavy vehicle sector, and perpetually rising fuel and raw material costs have led both to Goodyear’s aggressive – and developing-market regarding – approach and the company’s slump in the stock market.

27th June 2008/by Tyrepress Editors