Continental AG has inked an agreement to acquire Veyance Technologies from Carlyle Group for around EUR1.4 billion ($1.9 billion) as it expands beyond its auto business. Continental expects the acquisition to boost profit of its ContiTech unit immediately upon completion in the fourth quarter of 2013. The Ohio-based Veyance Technologies produces industrial hoses and conveyor belts.
The acquisition can be funded using available cash and credit lines. "This acquisition will enable Continental to come a step closer to its strategic goal of increasing further our proportion of sales to industrial customers and private end users," Continental chief executive Elmar Degenhart said in a statement. He remarked that the planned integration of Veyance into Continental’s ContiTech division will expand the company’s position in rubber and plastics technologies on a global basis."
Continental is aiming for a fifth straight year of record sales in 2014 after deliveries of parking-assistance systems and braking electronics boosted sales in 2013. The 29,700-strong ContiTech generated around EUR3.9 billion in sales in 2013, or accounting for about 12 percent of the Continental’s revenue. Once merged with Veyance, ContiTech unit will have sales of about EUR5.4 billion and will employ 39,000 people globally.
"The acquisition can be beneficial for Continental to become more independent of auto manufacturers and the tire business," remarked Frank Schwope, an analyst at NordLB, adding that the company has managed to cut debt as planned and now has the opportunity to invest again. The combination Veyance and ContiTech is expected to generate savings of around EUR75 million over four years, ContiTech chief Heinz-Gerhard Wente said.