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Though not exactly generous, the 21% premium would hand Einhorn a quick profit — he owns 3% of the company — while beefing up Schaeffler’s electric-vehicle component offering. Long-suffering Schaeffler investors are also being offered voting rights. Vitesco hasn’t yet said what it thinks of the offer.
This is the latest in a long game of corporate musical chairs in which the Schaeffler family has tried – with mixed results – to position its various investments for the digital and electric-vehicle age. Its struggles illustrate the wrenching changes Germany’s industrial base faces.
In 2008, the Schaefflers nearly bankrupted themselves trying to acquire the much larger Continental AG; when stock markets tanked during the financial crisis, far more investors accepted their offer than anticipated.
The family was left with large stakes in both companies. Schaeffler spent the next few years repairing its balance sheet, while trying to convince investors it has a bright future even after combustion-engine cars are extinct.
Continental, a tire and automotive electronics specialist, has been attempting to remake itself too. In 2021, it spun off the Vitesco powertrain activities at a much lower valuation than analysts had anticipated. Now, the family owners want to merge Vitesco into Schaeffler.
For a company with around €16 billion of annual sales, Schaeffler’s €3.4 billion valuation is embarrassing — it’s around the same as Vitesco even though the latter has barely half as much revenue. (Georg Schaeffler’s $6.4 billion net worth is also a fraction of what it was.)
Adding Vitesco would beef up Schaeffler’s offering for battery-powered cars. Though Vitesco must undergo a reinvention of its own, its product range includes battery-management and electric-drive systems which have much better growth prospects. Analysts are mostly bullish on Vitesco stock and none has a sell recommendation.
Schaeffler expects around €600 million of annual synergies by 2029 from combining the two businesses; the 91 euros per share offer would cost it around €1.8 billion euros if all the non-family shareholders accept.
The timing is curious, coming ahead of another possible recession, but it’s certainly much more manageable financially than buying Continental. I’m not sure it will help Schaeffler’s valuation much though. Investors may prefer pure-play EV companies, rather than diversified groups with plenty of combustion-engine baggage. It also means Schaeffler is doubling down on automotive, when its industrial activities have higher profit margins.
The one piece of unequivocally good news is that the Schaeffler family is offering to surrender 100% voting control. As a firm believer in the one share-one vote principle, I’ve long argued for this step, although the family will still call the shots because it will good cown 70% of the merged company.
As with other Vitesco investors, Einhorn and his Greenlight Capital LLC can choose whether to accept the offer or remain invested and become Schaeffler shareholders and thereby profit from the expected synergies. Vitesco’s shares have gained almost 50% since Einhorn revealed he was “bullish” on the stock, while Schaeffler’s fell 4% after announcing the takeover offer. I wouldn’t blame him for taking the swift win.
More From Bloomberg Opinion
• Europe’s Broadside Against Chinese EVs Plays with Fire: Chris Bryant
• Musk’s Tesla Problem Isn’t About Idle Factories: Liam Denning
• Automakers, It Won’t Hurt to Share That Buyback Bounty: Liam Denning
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Chris Bryant is a Bloomberg Opinion columnist covering industrial companies in Europe. Previously, he was a reporter for the Financial Times.
More stories like this are available on bloomberg.com/opinion
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