Continental expects it will receive antitrust approval from the European Commission for its VDO acquisition by the end of this month, without having to sell off any key assets.
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“I can assure the area that they have pointed out (where the EU sees an antitrust problem) is insignificant for the total deal and very, very small,” chief executive Manfred Wennemer said at the Reuters Autos Summit in Frankfurt.
As [he did] when Continental purchased German non-tyre rubber company Phoenix in 2004, Wennemer said he offered authorities to sell a business to facilitate approval.
“If you make an offer like that, automatically the time the European Commission has is prolonged by 10 days. So we were completely aware that by us making the offer to sell off this business the date would be pushed to 29 November 29,” he told Reuters.
He declined to say which assets might have to be sold or how many millions in revenue they generate.
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By GlobalData“It’s so insignificant. We also sold off three businesses when we did Phoenix; did you find out which ones they were? In one case we just had to sell a machine, to make sure that one of our competitors could start competition,” Wennemer added.
Despite the 10 working-day delay in approval, Continental was optimistic that it was only a matter of days before European officials would give it the green light.
“We are very confident that it’s going to be finished by the end of November, but the commission always has the right to go into phase II, and then it takes more time,” he said.
He declined to give further details about the restructuring of VDO, explaining that this would take two to three months after the deal closes before they could reveal any news.
Wennemer pulled off the deal of his career when he agreed to pay Siemens a nominal sum of EUR11.4bn ($US16.9bn) for its VDO automotive electronics business, making Continental in one stroke the world’s fifth-largest supplier to the automotive industry.
Standard & Poor’s downgraded its corporate debt one notch to BBB last Friday as a result of the acquisition, adding that the rating “assumes that Continental will successfully place its planned 1.5 billion euro hybrid bond in the near future”.
Wennemer said this was “under discussion” and that he was closely monitoring the capital markets for the right time to issue a hybrid bond, but said he had no intention of needlessly putting himself under time pressure.
“We will see how the markets develop,” he said, declining to comment on what the conditions of a possible hybrid might be.
Due to the delayed effect of rising spot prices for raw materials, Continental planned to increase prices on its car and truck tyres for all markets in the first quarter of next year.
“How could we eat and not pass on a 10% or 20% raw material cost increase? We will immediately see the effects in our P&L,” he said, without directly specifying how much he would hike tyre prices next year.
According to the Reuters report, Wennemer reiterated his targets of 5% organic growth and higher earnings for the stand-alone Continental business in 2008, excluding profits from the consolidation of VDO.
