GERMAN car parts maker Schaeffler Group has sold a 3.9 per cent stake in automotive supplier Continental AG for about €950m (£798m), taking advantage of a more than 20-year high in Continental's share price to pay down debt.
Schaeffler placed 7.8m shares with international investors at €122.50 apiece, a 3.5 per cent discount to Monday’s closing price.
Shares in Continental dropped over three per cent to €123 yesterday, making it one of the biggest fallers on the Dax.
The move is one of several measures to cut debt after privately-held Schaeffler’s debt-financed takeover bid for Continental in 2008 caused liabilities to soar. In July, it struck a new credit agreement worth €3.9bn.
Schaeffler will use proceeds from the placement and an additional €325m from its free cashflow to cut its gross debt to about €9bn from around €10.3bn.
The transaction, managed by Goldman Sachs, cuts Schaeffler’s stake in Continental to about 46 per cent from 49.9 per cent.
It agreed not to sell any more Continental shares for 180 days and confirmed it considers the holding a “long-term strategic participation”.
City A.M. Reporter