Continental Rejects ‘Unlawful’ 11.2 billion Euro Schaeffler Takeover

16th July 2008 | 0 Comments

Continental AG has sharply rejected a 69.37 euros per share (roughly 11.2 billion euros) cash takeover offer from Schaeffler Group, describing it as an “opportunistic approach [that] does not reflect the full value of the company.” Continental AG was officially informed by the Schaeffler Group about its decision to make a takeover offer for the company on Tuesday 14 July and hit out publicly a day later (Wednesday). In a company statement Continental said the offer has “no convincing strategic rationale for a business combination” and that “Schaeffler is trying to achieve control over Continental in an unlawful manner.”

For the first time Continental lent its support to claims that Schaeffler already indirectly controls roughly a third of the company: “According to our analysis, the Schaeffler Group has secured access to 36 per cent of the outstanding capital of Continental in an unlawful manner – with the help of derivative positions and collaborating banks. This would result in a comfortable voting majority at the shareholders meeting and may even lead to a qualified voting majority.” According to the Financial Times, Schaeffler holds 2.97 per cent of Continental’s stock directly and has amassed the right to own an additional 32.95 per cent stake through various options. All of which begs the question, how can Continental fight off what is rapidly becoming the largest hostile takeover bid in Europe this year?

Despite press speculation that the potential takeover may result in the divestment of the tyre business, Schaeffler Group President and CEO, Dr. Jürgen Geißinger said the group’s focus is on combining the strengths of the two companies: “Schaeffler expressly supports the strategy of Continental including its tyre business.” His statement continued: “Schaeffler will not break up Continental AG. The company will continue to be listed on the stock exchange and, if possible, remain in the DAX index. Continental will remain an independent company headquartered in Hanover. No jobs will be lost in conjunction with the transaction.”

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