Continental plans to list unit

Continental’s supervisory board is moving ahead with plans for an initial public offering of its powertrain unit and a new corporate structure by early July, a sign the car parts maker’s biggest overhaul in decades is taking shape, according to people familiar with the matter.

The company’s favoured option was to list part of the division that makes components for combustion engines, generating cash to invest in growth areas such as electric vehicles and self-driving features, said the people, who asked not to be identified because the talks are confidential.

An alternative proposed by the billionaire Schaeffler family, Continental’s largest shareholder, would have spun off the business to investors, but that is no longer being considered, according to the people.

Continental would discuss the results of a review of its operational structure with relevant stakeholders after completing the analysis by mid-2018, a company spokesman said.

He declined to elaborate on the state of negotiations.

A spokesman for Schaeffler declined to comment.

Continental’s powertrain unit generated €7.7bn in sales in 2017 and employed more than 40,000 people.

Brokering a deal would mark an achievement for chairman Wolfgang Reitzle, who is separately arranging a merger for industrial gas maker Linde, where he also leads the supervisory board.

Reitzle was brought in by Continental in 2009 after an aggressive stake purchase by the Schaefflers triggered departures of top management.

Continental, the world’s second-largest maker of car parts, has been looking at whether to change its corporate structure since late 2017.

CEO Elmar Degenhart outlined a potential project in April to separate a portion of the business that makes engines and transmissions to give it “more free space”.

The powertrain division needed to be especially flexible as more than half of its revenue was affected by the automotive industry’s looming shift toward electric cars, Degenhart said.

Continental’s possible demerger remained critical to the story, Max Warburton, an analyst for Sanford C Bernstein, said in a note to clients.

The new structure was still not clear, Warburton said.

THE FAVOURED OPTION IS TO LIST PART OF THE DIVISION THAT MAKES COMBUSTION ENGINE COMPONENTS