Continental-Schaeffler Merger Timing Not Decided

Resource from: CBCC Likes:2944

Jan 12,2010

Continental AG, Europe’s second- biggest car-parts maker, said it aims to merge with controlling shareholder Schaeffler Group “in the medium term” in a way that will assure an investment-grade debt rating. The companies haven’t decided on the timing of any combination, or on the merged entity’s financial structure, Hanover, Germany-based Continental said in a stock-sale filing. Schaeffler, which makes ball bearings for the automotive and aerospace industries, controls about 90 percent of Continental after a debt-financed takeover bid in 2008. The companies have been in talks since then concerning a potential merger. Continental’s debt is rated B+ at Standard & Poor’s and Fitch Ratings, four levels below investment grade. Continental’s supervisory board agreed on Jan. 6 to a 1.1 billion-euro ($1.6 billion) share sale to help refinance 9.5 billion euros of debt stemming from its purchase of Siemens AG’s VDO car-parts unit in 2007. The company agreed with banks in December on a 2.5 billion-euro credit line maturing in 2012. Herzogenaurach, Germany-based Schaeffler separately has 12 billion euros of debt from buying Continental. Continental also said it won’t pay a dividend on its shares for 2009 and that it isn’t likely to pay a dividend for 2010. It said it may not be able to pay a dividend until August 2012.

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