Schaeffler plans IPO to cut debt
SCHAEFFLER, the German industrial company specialising in ball bearings and automotive parts, plans an IPO that may be among the largest in Germany this year as it seeks to cut debt.
The initial public offering ‘is the final step of the realignment of our capital and corporate structure’
SCHAEFFLER, the German family-owned industrial company specialising in ball bearings and automotive parts, plans an initial public offering (IPO) that may be among the largest in Germany this year as it seeks to pay down debt.
The company may raise as much as €3bn in the IPO, people familiar with the matter said, asking not to be named because the details are not public.
Schaeffler planned to list a stake of about 25% in Frankfurt by selling as many as 166-million new and existing shares, the manufacturer said yesterday.
The holding company for the Schaeffler family said it planned to rearrange €3.6bn of debt, and four banks had agreed to loans and a revolving credit line.
A successful IPO would advance a turnaround after the credit crisis, which weighed on Schaeffler as it made a takeover bid for German car-parts maker Continental at the height of the global crunch.
Its net debt was €6.24bn at the end of the first half, accumulated mainly from becoming the biggest Continental shareholder, in which Schaeffler owns about 46%.
The IPO “is the final step of the realignment of our capital and corporate structure”, chairman Georg Schaeffler said.
The share sale would be among Germany’s largest IPOs this year, alongside Bayer’s planned €2.5bn listing of its plastics unit, Covestro.
As many as 100-million shares would be sold by the holding company and 66-million would be part of a capital increase, the company said.
Deutsche Bank and Citigroup are co-ordinating the IPO, with Bank of America Merrill Lynch and HSBC as book runners, according to the term sheet for the sale.
The proceeds from the new shares will be used to reduce debt at both Schaeffler and the holding company, and management of the operating business plans to further repay an additional €1bn of debt from operating cash flow by 2018.
Schaeffler said it planned to pay a dividend to shareholders of 25%-35% of annual net income, starting with this year.
Its roller-bearings are used in the London Eye Ferris wheel and Airbus A380 double-decker.
Schaeffler posted a 4.9% increase in revenue at constant currency rates in the first half, to €6.7bn. Business this summer was weaker than expected, especially automotive in China, and sales for the full year would probably increase by 4%-5% at constant exchange rates, the company said.
Schaeffler, which competes with SKF of Sweden and Timken in the US, said this year’s profit margin would be similar to the 12.2% it recorded in the first half. Last year Schaeffler’s earnings before interest and taxes rose 51% to €1.5bn.
The company is controlled by Maria-Elisabeth SchaefflerThumann and her son Georg, the chairman.
He ranks among the richest Germans, with a fortune of about $19.8bn, according to the Bloomberg billionaires index.
The shares to be sold in the offering will not have voting rights, allowing the family to retain control.
“The Schaeffler Group will remain a family business in the future,” Ms Schaeffler-Thumann said. “As shareholders we will take responsibility to further successfully develop our company in the interest of our customers, our suppliers and our many employees.”
The banks that were arranging the IPO had also agreed to provide a term loan, a revolving credit facility and a bridge loan to be repaid by the issuance of new bonds by Schaeffler Holding later, the company said.
All outstanding bonds of its Schaeffler Holding Finance unit would be redeemed, the company said.