Schaeffler AG is offering to buy Vitesco Technologies Group AG in a €3.64 billion ($3.8 billion) deal that would bolster the German ball-bearings maker’s presence in the electric-vehicle supply chain.
(Bloomberg) — Schaeffler AG is offering to buy Vitesco Technologies Group AG in a €3.64 billion ($3.8 billion) deal that would bolster the German ball-bearings maker’s presence in the electric-vehicle supply chain.
Schaeffler — whose billionaire owners already control almost half of Vitesco — said Monday it’s offered €91 a share in cash for the company, confirming an earlier report by Bloomberg News. The company expects the transaction to boost earnings before interest and taxes by €600 million annually by 2029.
The Schaeffler family controls auto-part makers Vitesco, Schaeffler and Continental AG, and is reshaping its industrial empire as the shift toward EVs accelerates. The Schaeffler-Vitesco deal would combine the former’s mechanical presence with the latter’s capabilities in power electronics, Schaeffler Chief Executive Officer Klaus Rosenfeld said in a phone interview.
Vitesco jumped as much as 21% to €91.30 in Frankfurt trading, while Schaeffler fell as much as 9.8% to €4.92. While today’s news might surprise because Schaeffler has been keen to cut its exposure to autos, the deal fills a gap in the company’s e-mobility portfolio, Oddo analysts wrote in a note.
The combined company will have the Schaeffler family’s holding firm as a joint shareholder and employ more than 120,000 people. The family has increased their Vitesco stake to 58.9% via a derivatives deal, according to a separate statement Monday.
The company expects to finance about €1.8 billion of the offer, with debt levels as part of the takeover expected to start declining from next year, Rosenfeld said. The family has agreed to eventually sell its Vitesco shares to Schaeffler, the CEO added.
The Schaeffler family’s holdings in Vitesco and Continental stems from their debt-fueled takeover of Continental in 2008. The move, started just before the global financial crisis hit, nearly brought down the company, which had to ask for emergency support as credit markets seized up. The billionaire family still holds 46% of Continental, which spun off Vitesco in 2021.
Read more: Mother and Son’s $35 Billion Fortune Shrinks on Auto Woes
Rosenfeld, who has served as Schaeffler CEO since 2014, said the Herzogenaurach-based company will take steps to simplify its complex shareholder structure. This includes converting Schaeffler’s free-floating non-voting preference shares into common stock with voting rights, paving the way for the company to be included in Germany’s MDAX Index.
The family are among Germany’s richest, with Georg Schaeffler and his mother Maria-Elisabeth Schaeffler-Thumann’s combined wealth estimated at €7.8 billion.
Schaeffler secured a financing package from Bank of America, BNP Paribas and Citigroup for the transaction and expects one-off integration costs of as much as €665 million. The company had about €628 million in annual free cash flow at the end of June, according to data compiled by Bloomberg. The deal is expected to be completed in the fourth quarter of next year.
The combination with Vitesco could foreshadow further moves to reshape the Schaefflers’ industrial holdings. Continental’s chief executive officer recently told German newspaper Welt am Sonntag that he’s open to selling businesses if it will help create value.
The company is already considering divesting parts of ContiTech, a smaller unit that also makes car parts including drive belts and engine pulleys.
–With assistance from Christoph Rauwald and Alexandra Muller.
(Updated with Schaeffler family increased Vitesco share in fifth paragraph)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.