Continental AG has agreed a wide-ranging peace deal with hostile takeover bidder Schaeffler that will see the smaller ball-bearing specialist take a strategic stake in Conti, whose CEO said he would depart at the end of the month.
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Schaeffler KG had increased its offer price to EUR75 a share (from EUR70.12) and guaranteed to compensate Conti for any possible disadvantages up to EUR522m, Conti said in a statement on Wednesday, which insisted that its current business strategy would continue.
A detailed investment agreement between both firms regulates Schaeffler’s future role as shareholder and Schaeffler has also promised to remain a minority shareholding until “at least 2012”.
“With this agreement [between Continental AG, Schaeffler KG, Maria-Elisabeth Schaeffler and Georg Schaeffler], the dispute regarding the public takeover offer by the… family owned business for the international car parts supplier has been settled. Former chancellor Gerhard Schröder [will act] as a guarantor for ensuring the interests of all stakeholders of Continental,” the statement said.
It added the improved offer price and the obligation to compensate possible negative impacts for Continental greatly improved on the original Schaeffler offer and the deal provided clarity for the future.
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By GlobalData“For its customers, Continental remains a reliable long-term partner that is extremely well positioned. [Our] employees can continue to rely on the clear focus of our concept for the future which we have developed over the last years,” Conti added.
The agreement cannot be terminated by the parties before spring 2014.
Conti said the raised offer gives its shareholders roughly EUR800m more and is a premium of 39% on its stock price immediately before announcement of the takeover bid, 20% on the monthly average price and 8% on the three-month average price prior to the bid. Shareholders have until 16 September to decide whether to accept the improved offer.
“Schaeffler has undertaken to limit its minority shareholding in Continental to up to 49.99% for a period of four years; to support the ongoing strategy and business policies of Continental AG’s management board while maintaining its current market and brand appearance; and to not demand a sale of activities or seek other material structural measures,” Conti added.
Schaeffler has also provided guarantees concerning any sales of portions of its minority stake in Conti and agreed that there will be no changes to Continental AG’s form of incorporation, its structure, its stock market listing, dividend policy or an increase of its debt to equity ratio against its wishes.
Schaeffler has also agreed not to undertake any measures – not agreed first with Conti – affecting current collective bargaining or works council agreements or abolishing the employees’ codetermination rights based on parity in the supervisory board.
It will also respect all current rights of employees, works councils and labour unions plus current agreements, regulations and contracts in force at Continental.
Once takeover offer formalities are complete, both parties will consider strategic cooperation projects, particularly in the powertrain division, “based on the principles of an alliance of equals between two productive and independent companies”, Conti added.
As guarantor, former German chancellor Gerhard Schröder will enforce Schaeffler’s obligations under the agreement in or out of court.
“It is the mutual goal to increase the value of Continental sustainably and on a long-term basis and to further develop” the company in the interests of all shareholders,” the statement said.
The deal – reached only after weeks of apparently tense negotiations – prompted Continental CEO Manfred Wennemer to resign, effective 31 August.
“The supervisory board has agreed to this request with great respect for Wennemer’s achievements,” it said in a separate statement. “His successor will be appointed in the immediate future.”
Wennemer became CEO in September 2001. He had opposed the Schaeffler takeover bid, describing tactics Schaeffler used to acquire a 36% stake in the company between March and July as “high-handed and irresponsible.”
Conti expects annual sales of about EUR26.4bn this year. It employs 150,000 at 200 locations in 36 countries.
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