Bearings maker Schaeffler can afford to play hardball in the $18 billion battle with Continental AG (CONG.DE: Quote, Profile, Research) Chief Executive Manfred Wennemer over control of the German car parts group.
With the goodwill of management and employees the only asset it cannot buy, the question is will it even try.
Wennemer clearly laid down conditions to reenter takeover talks by calling on Schaeffler to either offer more money or want fewer shares, but barring the appearance of a white knight he has scant leverage to force his rival into a retreat.
"The pressure on Schaeffler is not that high so there is no direct cause that would prompt them to alter their approach," said one German analyst who saw little risk a friendly bidder would come to Continental's rescue as long as Schaeffler retains its access to a blocking minority.
Schaeffler has been clear that it would not accept anything less than 30 percent and any such compromise would negate the core motivation behind Schaeffler's strategy so far -- the element of surprise.
Discreetly arranging access to 36 percent of Continental's stock mainly via swap contracts via a network of friendly banks let it avoid triggering disclosure thresholds that would have led to takeover speculation and sent Continental shares soaring.
Agreeing to a lower stake would mean another bid would be necessary under German law if Schaeffler at some later date sought to expand its holding past the 30 percent mark, and it is unlikely that Continental would ever be this cheap again.
"The problem with companies like Schaeffler is that you don't have them on your radar screen," another analyst said when asked why the market had priced out the takeover premium and instead had valued Continental at recession-level multiples.
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