What both companies diplomatically disguised on Monday as a “merger”, “merger” or “combination” is de facto a takeover: Schaeffler AG is swallowing the drive specialist Vitesco Technologies. While shareholders are still considering whether they should sell their shares to Schaeffler, the management and supervisory boards of both companies have reached an agreement on the deal. They signed a Business Combination Agreement (BCA), which stipulates in detail what the future company should look like, right down to the staffing of the future board of directors. “This contract is a milestone on the way to merging the two companies because both sides have agreed on how we will proceed,” said Schaeffler CEO Klaus Rosenfeld South German newspaper. “It’s a bit like a prenuptial agreement.”
It was agreed that Vitesco Technologies, based in Regensburg, a spin-off from Continental AG, would presumably be integrated into Schaeffler AG in autumn 2024 and lose its name. The headquarters of the future group will be Herzogenaurach near Nuremberg, the headquarters of Schaeffler. The future of Vitesco CEO Andreas Wolf, 63, is unclear. His contract expires on September 30, 2024. When asked, a Vitesco spokeswoman did not provide any information about whether Wolf would have a role in the new company. She announced “a separate publication in 2023”. There are many signs that Wolf is about to say goodbye.
A group is created with a turnover of 25 billion euros
What should please shareholders: Along with the agreement, Schaeffler raised its takeover offer on Monday. Instead of 91 euros, the company wants to pay 94 euros per share. This offer is 24.8 percent above the closing price of the Vitesco paper on October 6th, the last trading day before the announcement of the takeover offer. Compared to the average price in the previous three months, it is 23.4 percent higher. The acceptance period for the offer ends on December 15th.
When Schaeffler and Vitesco merge, probably in autumn 2024, a supplier group for the automotive sector and other industries will be created with around 25 billion euros in sales, 120,000 employees and more than 100 factories worldwide. Rosenfeld estimates the resulting synergy effect in terms of profit before taxes and interest expenses (EBIT) at 600 million euros annually from 2029. The deal still has to be approved by two extraordinary general meetings of both companies, which is likely to be a formality. Simply because Georg Schaeffler and his mother Maria-Elisabeth hold around half of the Vitesco shares and three quarters in their family business of the same name. As for the stock purchases, “we are very confident that we will get enough shares to make the transaction successful,” Rosenfeld said.
The integration process itself will be controlled by a committee made up of equal numbers of managers from both companies, which will meet for the first time in December. It should present a business plan for the new company by mid-2024 at the latest. Schaeffler said reassuringly to Vitesco that they were “aware of the importance of the Vitesco locations”, and in particular the company headquarters in Regensburg. The integration will be carried out “in such a way that ongoing business in the best interests of the customers is not impaired”.
“Achieving a common culture”
The fact that the board of directors of the new group structure is already largely in place shows how far everything has progressed. It should have a total of nine members; Only one position is still vacant. Vitesco Chief Technology Officer Thomas Stierle will take over the central area of e-mobility. As stated, the big plan behind the takeover is to create a major player in electromobility on a global scale. Schaeffler announced a “complete portfolio” of products with which it wants to “take advantage of the accelerated growth potential of electromobility”. The new Schaeffler AG will be divided into four divisions: E-mobility, drive train and chassis, spare parts, and ball bearings/industry. The heads of the four business regions will also be members of the board.
No resistance to the takeover is expected from employees. The IG Metall union has already signaled its consent. Especially since Schaeffler promises not to change the collective bargaining agreement or the remuneration and employer benefits. A future agreement concluded with the union in 2018 on locations and collective bargaining also applies in the new structure. “It is important to me that we create a common culture that, in addition to stability, also includes collective and trusting cooperation, especially with employee representatives,” said CEO Rosenfeld of the SZ. “Our goal is to form a team that is 100 percent behind the new company and wants to take advantage of the enormous opportunities that arise from it.”