Continental plans capital hike of $2.1 billion
FRANKFURT — German car parts and tire maker Continental AG plans a capital increase of up to euro1.5 billion ($2.1 billion) to strengthen its balance sheet and is in refinancing talks with banks, the company said.
“With this decision, the supervisory and executive boards intend to equip Continental with a sound financial structure for the medium and long term,” the Hannover-based company said in a brief statement late Thursday after a meeting of the company’s supervisory board.
In a statement early Friday, the company also said the board — the equivalent of a U.S. board of directors — could not agree whether to oust or keep executive board chairman Karl-Thomas Neumann. The move is to be related to a possible merger with Schaeffler Group KG, which took control of Continental in January.
A vote was taken, but did not achieve the two-thirds majority needed, Continental said. A new meeting was scheduled for August 12, and “a decision is expected to be made at that meeting.”
If Neumann is ousted, he would be the second executive to leave the company this year after supervisory board chairman Hubertus Gruenberg left in March.
In addition to preparing the capital increase, Continental said it “is seeking to initiate refinancing talks with its creditor banks to deal with repayment of the credit tranche in the amount of euro3.5 billion due in August 2010.”
The company, which reported a second-quarter net loss of euro190 million on Thursday, said it held euro9.75 billion in debt at the end of June 2009, largely stemming from its euro11 billion takeover of another German car parts maker, VDO, in 2007.
Herzogenaurach-based Schaeffler, another car parts and ball bearing company, took control of Continental in a deal valued at some $18 billion. That placed heavy debts on family-owned Schaeffler as well, just as the economic crisis was taking hold, dampening sales of cars and car parts.
Though no formal merger announcement has come fourth, a combination of Schaeffler and Continental would create one of the world’s largest auto parts makers, rivaling the likes of Germany’s Robert Bosch GmbH. The two companies are already working at joint projects like purchasing.
Shares of Continental were nearly 5 percent lower at euro25.50 in Frankfurt morning trading.
On the Net:
www.conti-online.com
www.schaeffler.com
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