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Schaeffler family increases stake in Continental

Family-owned industrial group Schaeffler moved to bolster its financial strength, with the announcement on 28 March that it plans to increase its direct stake in car parts maker Continental, which it acquired in 2008, while also reducing its debt through the sale of shares.

In a statement, the Schaeffler Group, owned by the founding family, said that it will increase its direct stake in Continental from 42.2% to almost 50%. It will do this by purchasing Continental shares held by its two lending banks MM Warburg and Bankhaus Metzler. The banks hold around 33% of Continental shares on behalf of the family group.

At the same time, the family will also reduce the group’s debt with the sale of 15% of its indirect stake in Continental. The sale will help Schaeffler reduce its obligations to the banks by €2.8 billion, with its total debt falling to €4.6 billion. Schaeffler’s total stake in Continental will also reduce to 60% from 75%. The group was unavailable to comment on what this means for the family-owned business.

Second-generation chairman of the board Georg Schaeffler said in a statement: “These measures will give us the flexibility required for the further successful strategic development of the Schaeffler Group.”

The Herzogenaurach, Germany-based group acquired Continental in 2008 in a much-publicised takeover. Continental is the world’s fourth largest tire manufacturer and its share price has risen by over 50% over the last year. It is currently valued at €62.96 (as on 28 March).

The takeover deal, made during the worst period of the financial crisis shortly after the collapse of Lehman Brothers, saddled the Schaeffler Group with a debt of €12 billion. Reports labelled the family as gamblers and speculations grew about the decline of the Schaeffler family business empire.

The Schaeffler Group was founded in 1946 by brothers Wilhelm and Georg Schaeffler. It is jointly owned by 68-year-old Maria-Elisabeth Schaeffler, the late Georg’s wife, and their son, also named Georg. Its revenues for the first nine months of 2010 was €7 billion.

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