A Blessing for Conti?

August 12, 2009

FRANCE-PROTESTS/Three things stand out about the “compromise” reached between German auto parts and tyre maker Continental and its biggest shareholder Schaeffler to oust Conti’s CEO Karl-Thomas Neumann in favour of Schaeffler’s own man Elmar Degenhart.

This is – by the way – far from a good deal as far as the Conti minorities are concerned. It thrusts the company ever more firmly into Schaeffler’s pocket. Many Conti shareholders are probably wishing they had sold when 75 euros a share was on the table.

But anyway, back to what the compromise may mean.

The first thing is that Schaeffler appears willing — for now at least — to  allow Conti to raise 1.5 billion euros – as Neumann  had wanted – despite the fact that a share issue is likely to dilute the indebted family-owned company’s holding in Conti since it would be unable to follow its money and subscribe to new shares. Of course this does not specify the terms on which a capital increase might be done – and there’s still no certainty that anyone will want to stump up the cash.

The second is the wording of a statement from Schaeffler on its objectives:

The Schaeffler Group continues to adhere to its objective of creating a global technology group consisting of the three divisions Automotive, Industrial and Rubber.

This appears to say that Rubber — the tyres for which Continental is famous –  may remain part of a combined Conti-Schaeffler. There had been speculation that Schaeffler was pressing to sell this part of the business to help it pay down off some of the huge debts hanging over both companies.  Of course it doesnt necessarily bind Schaeffler to retain all of Conti’s assets – especially if the capital increase turns out to be undoable.

The third interesting point to come out of the musical chairs was a reference by the union representative on the Conti board Werner Bischoff to the role played by Commerzbank CEO Martin Blessing. Commerzbank is a major lender to Schaeffler and has a vested interest in ensuring both companies work their way through the mess they are in. 

It has long seemed that the only interested parties who could sort out the Schaeffler-Conti fight are the banks who have lent so heavily to both sides. Could this be a sign that they are finally rolling up their sleeves?

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[...] Reuters sieht besonders die Conti-Aktionäre als Verlierer der jüngsten Schaeffler-Offensive, durch die Continental noch tiefer in die Tasche von Schaeffler geschoben werde. „Viele Conti-Aktionäre bedauern womöglich, dass sie ihre Anteile nicht verkauft haben, als 75 Euro pro Papier auf dem Tisch lag.“ Unklar bleibe, ob sich Schaeffler in Zukunft von Conti-Assets – wie Rubber – trennen werde. Zwar habe Schaeffler gestern betont, am Ziel festzuhalten, einen globalen Technologiekonzern mit den drei Sparten Automotive, Industrial und Rubber zu schaffen. Sollte die Kapitalerhöhung aber misslingen, komme diese Frage erneut aufs Tapet. [...]