Schaeffler Group sold 1.8 billion euros ($2.5 billion) of Continental AG stock in order to reduce debt. M.M. Warburg and Bankhaus Metzler placed 29.7 million shares in the tiremaker, held on Schaeffler’s behalf, at 60 euros apiece. That reduces the stake controlled by Schaeffler from 75.1% to 60.3%.
According to reports, as a rebound in the auto industry increases earnings, Continental has surged 62% in the past year, raising its market value to 12.7 billion euros. Schaeffler said the higher circulation of Continental stock will position the tiremaker to reapply for inclusion on Germany’s benchmark DAX Index.
“This expands the independence and strategic options for Continental and cuts Schaeffler’s access to its profits,” Aleksej Wunrau, an analyst at BHF-Bank AG in Frankfurt, told Bloomberg. “A merger is still possible but a lot less probable now because Schaeffler would have to confront a blocking minority of shareholders.”
Schaeffler accumulated 12 billion euros in debt from purchasing its stake in the car-parts maker in 2008. As part of the today’s transaction, Schaeffler, which intends to convert to a corporation in the course of 2011, increased its direct Continental holding to 49.9% from 42.2%.
Money from the sale will help reduce debt at Schaeffler’s holding company, owned by Maria-Elisabeth Schaeffler and her son Georg, by 2.8 billion euros to 4.6 billion euros, the company said. The interest rate on the debt will be reduced to less than 10% from 17%.
