Sunday, February 8, 2009

Schaeffler In Crisis After Overpaying for Continental AG

In what could go down as the sad conclusion to the dumbest acquisition of all time, ball-bearing maker Schaeffler, which acquired Europe's second-largest auto-supplier Continental AG, has said in an e-mailed statement that it is seeking an investor, after being saddled with $14 billion of debt as part of the acquisition.

Schaeffler, which in September 2008 paid the ridiculous price of €75/share for 49.9% of Conti until 2012, at which point it would get full control, stated in the e-mail "The Schaeffler family is willing to sell" parts of its business to reduce debt. Conti shares closed at €14.58 on Friday, or an 80% discount from the acquisition price. Recently Continental was forced to seek an amendment of its credit facility with lender banks after it realized it would breach assorted leverage covenants. It will not help Schaeffler's deleveraging process that in the time since the acquisition, OEM manufacturers have decided they will not make any more cars... ever... leaving auto suppliers like grossly overelevered Conti high and dry... and soon to be possibly bankrupt. Sphere: Related Content
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