Auto parts maker Schaeffler Group announced its decision to sell 4% of Continental AG, part of its plan to reduce debt.
Schaeffler Group plans to reduce debt by taking advantage of Continental’s 20-year high share price. The company is offering investors 8 million shares to be able to pay its creditors, among which is Goldman Sachs.
On Monday, September 16th, Continental AG jumped to 126.95 euro, the highest level in more than two decades. Therefore the shares’ price would be somewhere around 1 billion euro. Currently Schaeffler Group owns just under half of Continental’s stock.
Schaeffler also wants to use another 325 million euro from its free cashflow, besides the 1 billion euro from the shares, to cut liabilities. Schaeffler spokesman said that the final result regarding this transaction will be announced today, 17th September.
The shares sale is one of Schaeffler’s several measures to reduce debt after the company’s debt-financed takeover bid for Hanover-based Continental back in 2008 caused liabilities to increase. Two months ago Schaeffler announced it has signed a new 3.9-billion-euro credit deal. At the end of June the company’s net debt reached 6.5 billion euro.
Schaeffler Group, which manufactures clutches and ball bearings, agreed not to sell any more shares of Continental for 180 days and said that it considers the Hanover-based company a “long-term strategic participation.”