Continental talks to 'white knight' bidders

German giant Continental is looking to stave off a hostile takeover bid from Schaeffler with help from friendly investors.

Continental is in talks with alternative buyers about a friendly bid.

Germany's embattled Continental, whose management is fending off a hostile takeover, is in talks with alternative buyers about a friendly bid, sources said yesterday. Last week, German ball-bearing maker Schaeffler launched a hostile $18 billion (Dh66.1bn) bid for the tyre-to-brakes firm. If the family-owned firm's approach is successful it would be the biggest takeover so far this year in Europe. But its advances have provoked a fight between Schaeffler, owned by billionaire Maria-Elisabeth Schaeffler, and the Continental chief executive Manfred Wennemer.

Mr Wennemer is now looking for an alternative offer from a friendly bidder or so-called white knight. Yesterday, two sources with direct knowledge of the matter said Continental was in talks with a "handful" of trade buyers and private equity investors. They said the potential buyers could win a stake in the company through a capital increase, buying shares on the market or making a rival bid for the company. They could also club together to increase their clout.

Seeking to boost its team of advisers as it considers defence options, Continental, which declined to comment, has asked banks including Citigroup and HSBC to help it, sources familiar with the matter said yesterday. The move would add the two banks, both of which have the ability to lend their client cash from their balance sheets, to existing adviser Goldman Sachs, known for its defensive advisory work. This could open new options for Continental including buying a rival.

Weighed down by a ?11bn (Dh62.6bn) debt pile accumulated to pay for its purchase of VDO, which makes the technology inside fuel injection systems, Continental now faces a slowdown in car buying as high oil prices bite. Under the terms of the Schaeffler offer, the combined group would be lumbered with a debt mountain three times as large. Although its single biggest profit maker is its tyre business, Continental is also strong in electronics like satellite navigation.

Schaeffler says a marriage between the two would set the stage for Germany to build the automobile of the future. Mr Wennemer says there is little benefit from a union. If Schaeffler succeeds in buying the group, which is three times its size, it would be the first time a German family business has taken over a company listed on the country's blue-chip DAX index. * Reuters