Conti confirms Schaeffler take-over talks

Douglas A. Bolduc, Automotive News

Munich, Germany -- Continental AG has confirmed that it has spoken with Schaeffler Group about the company's "possible investment" in the tyre and in-car electronic giant.

The conversation took place at the end of last week, the company said in a statement. The statement went on to say that no further conversations took place.

"As soon as Schaeffler Group has substantiated its plans, the management board of Continental will evaluate these and communicate its views in due course," the statement said.

The Saturday edition of the Financial Times reported that Germany's Schaeffler wants to acquire Continental.

A combination of the two companies would create an automotive parts-maker with annual sales of more than 35 billion euros ($55.48 billion). By comparison, the world's largest automotive supplier, Robert Bosch, had total sales of 28.4 billion euros ($45.02 billion) in 2007.

In a separate twist on Monday, Thomson Financial News reported that Bosch declined to comment on market rumours saying it plans a bid at 72 euros per share for Continental.

A Continental spokesman told Thomson Financial News: "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."

On Monday, the Financial Times Deutschland, citing sources, said Schaeffler, a German family-owned maker of ball bearings, might make a 10 billion euro ($15.85 billion) offer on Monday.

The Financial Times Deutschland said Schaeffler is also prepared to launch a hostile takeover bid if Continental mounts resistance to the offer.

"Those who might want to launch a hostile takeover would need all the luck available because we will fight against it," the Continental spokesman told Thomson Financial.

Schaeffler is much smaller than Continental, which last year acquired Siemens VDO Automotive for 11.4 billion euros ($18.07 billion) . Schaeffler had 2007 sales of 8.9 billion euros ($14.10 billion). Continental, including VDO, is expected to have sales of more than 26 billion euros ($41.20 billion) this year.

Continental Chief Technology Officer Karl-Thomas Neumann told ERJ's sister publication Automobilwoche that getting bigger has become a crucial part of remaining competitive.

"The investments for the development of new infotainment, hybrid or safety technologies are so great that a small player can't manage on its own. That's often not even possible for us any longer," Neumann said. "In the big leagues, economies of scale are naturally an attraction."

Privately held Schaeffler has three brands: INA, LuK and FAG. The group acquired ball bearings maker FAG Kugelfischer in 2001 in a hostile takeover.

Continental is busy integrating its new VDO operations and analysts have expressed doubts over the restructuring costs and the high financial impact of the huge acquisition last year. Continental shares have been under pressure in recent months.

From Automotive News (A Crain publication)

Press release from Continental