Schaeffler to Sell 1.8 Billion Euros in Continental AG Shares
Resource from: Schaeffler Group Likes:3088
Mar 28,2011
(March 28, 2011)
Schaeffler Group, the world’s second-biggest maker of roller bearings, has agreed with German banks to sell Continental AG (CON) shares worth about 1.8 billion euros ($2.5 billion) to reduce debt.
M.M. Warburg and Bankhaus Metzler will sell as many as 30 million shares in Europe’s second-largest tiremaker held on Schaeffler’s behalf through an accelerated bookbuilding, the Herzogenaurach, Germany-based company said in a statement yesterday. Schaeffler will also buy 15.5 million shares from the two lenders to increase its direct Continental holding to 49.9 percent from 42.2 percent.
Continental’s shares have surged 57 percent in the past 12 months, boosting its market value to 12.2 billion euros. The rebound in the auto industry last year has boosted the tiremaker’s sales and earnings. The company reported revenue and profit that beat analyst estimates for the fourth quarter and predicted rising sales from Asia this year will compensate for additional costs from surging rubber prices.
“A higher free float can only be a good thing for Continental shareholders,” said Arndt Ellinghorst, a Credit Suisse analyst in London with an “outperfom” recommendation on the shares.
Schaeffler, which intends to convert to an incorporated company in the course of 2011, said the increased circulation of Continental shares on the market will position the tiremaker to reapply for Germany’s benchmark DAX Index. (DAX) Goldman Sachs Group Inc. (GS) will manage the sale to institutional investors, Metzler said in a statement.
Accumulated Debt
Closely held Schaeffler accumulated 12 billion euros in debt from purchasing its stake in the car-parts maker. Schaeffler currently controls 75.1 percent of Continental, including the banks’ holdings. The stock rose 0.3 percent to 60.97 euros in Frankfurt trading March 25. The 1.8 billion-euro value for the stake being sold is based on the last closing price. The two banks and Schaeffler won’t sell additional shares in the next 12 months, they said.
Hanover, Germany-based Continental is also close to agreeing to new financing after banks offered more loans than it asked for, three people familiar with those talks told Bloomberg News March 26. Continental is seeking to secure cheaper terms and replace loans coming due next year. The company, which requested 6 billion euros, was offered about 8.5 billion euros in loans, two of the people said.
Continental Loans
Continental was seeking 6 billion euros of term loans and revolving credits from lenders for as long as three years to replace maturing debt, people familiar with the matter told Bloomberg News on March 10.
Standard & Poor’s rates Continental’s debt B, or five steps below investment grade. Moody’s Investors Service ranks it one step higher at B1. Both have a stable outlook on the ratings. Continental aims to return to investment grade by 2012.
One part of the credit coming due is a 4.06 billion-euro term loan. The other is a forward-start credit line of 2.5 billion euros signed in December 2009. Continental agreed to pay interest of between 475 basis points and 500 basis points more than benchmark lending rates for the loans, according to data compiled by Bloomberg. A basis point is 0.01 percentage point.
The debt stems from Continental’s 2007 acquisition of Siemens AG’s VDO unit for 11.4 billion euros.
Citigroup Inc. and Deutsche Bank AG are coordinating the refinancing for the Hanover, Germany-based company, people familiar with the discussions told Bloomberg on March 9.
(Schaeffler Group)
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1.The news above mentioned with detailed source are from internet.We are trying our best to assure they are accurate ,timely and safe so as to let bearing users and sellers read more related info.However, it doesn't mean we agree with any point of view referred in above contents and we are not responsible for the authenticity. If you want to publish the news,please note the source and you will be legally responsible for the news published.
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