Last year tyre manufacturer Continental AG boosted its annual turnover through the take over of Siemens VDO. Now the German tyre giant appears to be a victim of its own success. The company is now the subject of a takeover from the Schaeffler Group.
Continental’s success in leveraging the takeover of Siemens and its use of the stock market has had something of a sting in the tail as shareholders look set to improve their position by accepting the bid from Schaeffler. The 13.5 billion euro loan required to buy Siemens has left Continental vulnerable to stock market manoeuvrings. The huge loan, added to the joint problem of the rising cost of raw materials and a slow-down in sales, has pushed Conti’s share price down and left them vulnerable to an unwanted approach from Schaeffler.
This fact was highlighted in a recent report by market analysts Morgan Stanley, who stated that Continental were “the most levered company under our coverage” with debts representing more than 80 percent of the company’s value.
It seems that this is a story that will run for some time yet.