Germany's Continental to buy U.S. firm Veyance for $1.9 billion
By Andreas Cremer
BERLIN (Reuters) - German tire and car parts maker Continental (CONG.DE: Quote) has agreed to buy U.S. private equity investor Carlyle Group's (CG.O: Quote) Veyance Technologies, which once belonged to its rival Goodyear GT.O, for 1.4 billion euros ($1.9 billion).
Veyance, which employs 9,000 workers at 27 plants worldwide producing industrial hoses and belting, will be integrated into the German company's Contitech division, Continental said.
"Veyance will make an immediate positive contribution to the company's profitability," Chief Executive Elmar Degenhart said, adding that the purchase will be paid for from cash and available credit lines.
Contitech can imagine further acquisitions after the purchase of the U.S. competitor, which will raise the share of non-automotive sales at Continental to 32 percent of group revenue from 28 percent, still short of a 40-percent goal, division chief Heinz-Gerhard Wente said on a conference call.
Continental expects group sales to rise by more than 5 percent this year to about 35 billion euros as world auto markets recover, the company said last month.
The company aims for its adjusted operating margin to stay "comfortably" above 10 percent, after 11.2 percent in 2013. It is due to publish full results for 2013 on March 6.
Carlyle bought Veyance from Goodyear Tire and Rubber Company in 2007 for $1.475 billion and was licensed to continue to use the Goodyear Engineered Products brand for its range of belts, hoses and other products.
The addition to Contitech, which accounts for more than 10 percent of Continental's 2013 sales of 33.3 billion euros, will increase the company's presence in the United States and South America and create other opportunities overseas, Wente said. Continued...