Conti irritated by Schaeffler's 'interference'

By Klaus-Dieter Floerecke, Crain News Service

Hanover, Germany -- Continental AG's executive committee is accusing the company's biggest shareholder, family-owned Schaeffler Group, of interfering in Conti's financial dealings.

According to Conti, Schaeffler asked Conti's banks to be consulted on changes Conti is planning to the its loan agreements since it would soon be a major shareholder in the company.

Continental calls the conduct a “massive interference with the sovereign and independent management” of the company and accuses Schaeffler of violating the “spirit of the investor agreement that had been jointly worked out.”

Continental CEO Karl-Thomas Neumann also is expressing irritation that the intervention is taking place at a time when the European Uniuon still has not approved the takeover.

In an interview with the “Frankfurter Allgemeine Sonntagszeitung,” Schaffler Group head Maria-Elisabeth Schaeffler said: “Honestly, I cannot understand the excitement, and even less that it is made public.”

In the same interview, Schaeffler CEO Jürgen Geissinger said: “We did not breach agreements and we did not interfere with Continental's business.”

Schaeffler agreed in August to buy Continental, Europe's second largest auto parts manufacturer, for about $110.62 a share. The offer valued Continental at about $16.9 billion at current exchange rates.

Schaeffler now controls 90 percent of Continental´s stock. Investors tendered 82.4 percent of Continental's shares, more than anticipated, and Schaeffler purchased the rest on the open market.

Schaeffler said it expects to receive EU antitrust approval for the takeover on Dec. 19.

As for the refinancing, Conti CFO Alan Hippe said it is being looked at as a way of “safeguarding our financing as best as possible in a forward-looking manner, with a view to the uncertainties we are facing in the crisis year 2009.”

Hippe pointed out Conti is concerned with reducing indebtedness, and taking action now will help ensure Conti will have sufficient free cash flow in the coming years to achieve that.

Conti noted that the open-ended investment agreement reached with Schaeffler in August contains extensive provisions to safeguard the interests of Continental, its shareholders, employees and customers. It cannot be terminated by the parties before spring 2014.

From Tire Business (A Crain publication)