Schaeffler Group yesterday gave notice that it is ending its mutual investment agreement with Continental AG. Unless there is a change of heart, the agreement will terminate in May 2014.
Settled in August 2008, the agreement governs the cooperative relationship between the two companies with Schaeffler as the largest single Continental shareholder. Schaeffler currently holds a 49.9% share of Continental AG.
Schaeffler said the investment agreement “no longer has any practical relevance for either company” since “key provisions of the agreement expired in August 2012.” Schaeffler added that it and Continental have “benefitted from their excellent and pragmatic cooperation for years” and will continue this cooperation in the future.
“As Continental AG’s major shareholder, we are very pleased with Continental’s achievements over the past few years,” said Schaeffler Group owners and chief shareholders Maria-Elisabeth Schaeffler and Georg F.W. Schaeffler in a statement. “We consider our investment in Continental a long-term strategic investment aimed at sustainably increasing the value of Continental AG.”
Comments made by Continental CEO Elmar Degenhart had perhaps a less enthusiastic ring to them. “Notice of termination of the investment agreement is understandable from the vantage point of Schaeffler, our anchor shareholder,” he said. “We are confident that the two companies will continue their very good and goal-oriented cooperation on into the future.”
In 2008, Schaeffler Group paid 12.1 billion euros for Conti five times its size in revenue in a so-called “stealth takeover.” Offering to buy up all outstanding Continental share, Schaeffler ended up holding a 90% stake in the tire and auto component maker, despite setting an ownership limit of 49.99%.
As a result of being over-subscribed, Schaeffler had to borrow 16 billion euros to finance its Continental acquisition, and within half a year was struggling to finance the resulting high debt service payments. (Tyres & Accessories)