After weeks of hard bargaining, tire maker Continental finally said yes on August 21 to the advances of compatriot Schaeffler to create a new auto parts giant. But family owned Schaeffler had to raise its offer to 75 euros (US$111.15) per share from 70.12 euros and has had to pledge not to own more than 49.99% in Continental for four years, a Continental statement said.
Together the two companies have yearly sales of 35 billion euros and 215,000 employees, overtaking Bosch as the world's top supplier of automotive components making everything from hydraulic brakes to ball bearings.
Despite becoming the controlling shareholder, Schaeffler, which also makes aircraft parts, has agreed not to demand the sale of any of Continental's businesses or seek any other "material structural measures." It also committed to not changing Continental's brand, its headquarters, stock market listing, dividend policy or the collective bargaining rights of its workers without Continental's say so.
To ensure that the interests of all stakeholders are respected, none other than ex-chancellor and former local state premier Gerhard Schroeder has been named as a guarantor of fair play, Continental said.
Schaeffler will also compensate Continental for possible tax costs that may be triggered by the deal -- the bill for which could total just over half a billion euros.
Continental, based in Hanover, borrowed heavily in 2007 to carry out a seven-billion-euro takeover of Siemens' car parts unit VDO. This caused a slump in its share price, making it cheaper to buy for any predator.
Schaeffler, controlled by 66-year-old Maria-Elisabeth Schaeffler and her son Georg Schaeffler, saw its chance and in July made an audacious offer to buy Continental despite Schaeffler only being a third of its size.
Continental's chief executive since 2001 Manfred Wennemer, who fiercely opposed Schaeffler's takeover, has "asked ... to be relieved of his responsibilities" from the end of the month, the company said.
Copyright Agence France-Presse, 2008
