Continental AG, a German tiremaker, has received a takeover approach from Schaeffler Group, a closely held German car-parts maker, the Financial Times reported, citing people ``with knowledge of the deal.''
The transaction would be the biggest in Europe this year, the newspaper said, noting that Schaeffler has 9 billion euros ($14.3 billion) in revenue compared with Continental's 26 billion euros. Schaeffler is willing to make a hostile bid if Continental rejects its offer of talks, the newspaper said today. Royal Bank of Scotland Group Plc is arranging financing, the FT reported.
"Looking at the share price, a bid for Continental is within the realms of possibility,'' Juergen Pieper, a Frankfurt-based analyst at Bankhaus Metzler, said in a telephone interview. `"If you're thinking strategically and you believe that the automobile has a future, you can get a very good company with excellent prospects at a cheap price" Pieper has a `"buy" recommendation on the stock.
Continental's share price has fallen 39 percent this year and the market currently values Europe's second-largest tiremaker at 8.7 billion euros, less than the 11.4 billion euros it paid for Siemens AG's VDO auto-parts unit last year. Continental said April 29 first-quarter profit dropped 38 percent after the company paid interest charges to finance the purchase.
Continental's shares last traded at 1.32 times book value, or 9.04 times reported earnings.
At INA-Holding Schaeffler KG there was nobody available at the company's main office to comment. The owner of the Herzogenaurach, Germany-based maker of roller bearings, Marie Elisabeth Schaeffler, and her son Georg, rank 79th on a list of the world's richest people compiled by Forbes magazine.
Hannes Boekhoff, spokesman for Hanover, Germany-based Continental, said the company doesn't comment on speculation.
"In general, we have no reservations against investors who don't want to break up Continental and support the company's long- term strategy and policy,'' Boekhoff said. `"If someone plans a hostile bid, we'll wish him good luck as he'll need it.''
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