Imaginary enemies

12 August 2008 By John Foley Follow @johnsfoley

The German tyremaker can t easily squash Schaeffler Group s hostile E11.5bn takeover. Maybe it doesn t have to. For Schaeffler, a full takeover could easily turn into an own goal. Both sides have good reason to call a truce and it needn’t be a bad thing for shareholders.

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Continental AG's supervisory board was set to meet on Wednesday to discuss its response to an E11bn hostile takeover bid from Schaeffler Group. Schaeffler, a familyowned ball bearings producer, bought 8% of the German tyremaker's shares before making its offer, and holds derivatives giving it potential access to a total 36% of the shares.

Schaeffler has received bank funding for the takeover, from a consortium led by Royal Bank of Scotland. The amount committed covers the full cost of Conti's equity and transaction costs. It doesn't include full refinancing of Conti's E11bn debts, which consist mostly of bank loans taken out to finance the E11.4bn takeover of Siemens VDO in 2007.

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