The company, which is Europe’s second-largest auto parts maker and tiremaker has announced it struck a deal to buy Veyance Technologies Inc. – a maker of industrial hoses and conveyor belts – for 1.4 billion euros ($1.9 billion).
Continental AG said in a statement it expects Ohio-based Veyance to boost profit of its ContiTech unit immediately after the deal’s completion, as it can be funded from already available cash and credit lines. The company also said it expects to finish the acquisition by the beginning of this year’s fourth quarter.
“The acquisition can be beneficial for Continental to become more independent of auto manufacturers and the tire business,” said Frank Schwope, a Hanover-based analyst with NordLB. “Continental has reduced debt as planned and now has the opportunity to invest again.”
“This acquisition will enable Continental to come a step closer to its strategic goal of increasing further our proportion of sales to industrial customers and private end users,” Chief Executive Officer Elmar Degenhart said in the statement. “The planned integration of Veyance into our ContiTech division will expand our position in rubber and plastics technologies on a worldwide basis.”
ContiTech chief Heinz-Gerhard Wente also said during a conference call that combining the two companies could generate cost savings of around 75 million euros over the next four years – as the new Continental unit would have around 39,000 employees globally and 5.4 billion euros worth of sales.