Siemens VDO swallowed by fellow German

TWO of the world’s biggest automotive industry suppliers have concluded a massive deal that sees Continental Corporation taking over Siemens VDO for 11.4 billion Euro (A$19.1 billion).

The takeover deal was concluded just four days after receiving unconditional approval to proceed by the EU Commission – an approval that had, in fact, taken four months to win.

It applies with immediate effect, with the Siemens AG operations going into Continental’s December 2007 balance sheet.

Siemens VDO Australia chief executive Zoran Angelkovski, who is also the federal president of the Federation of Automotive Products Manufacturers (FAPM), remains CEO of the new wholly owned Australian subsidiary.

Continental secured the support of a consortium of some 39 international banks to finance the purchase of its fellow German company.

The company estimates that “net synergy effects” as a result of the takeover will benefit Continental by at least 170 billion Euro (A$284.5b) as of 2010.

“From what we know at the moment, we would be disappointed if it remained at this conservatively estimated sum,” said Continental chairman Manfred Wennemer yesterday. “The amount will presumably be higher. We will be able to provide more details in the next ten weeks.

“By consolidating forces, we will forge our Continental into one of the world’s foremost automotive suppliers.

“Following exhaustive preparation, we can now tackle the integration with a flying start,” said Mr Wennemer “It will take us another two to three months, however, to make a series of key decisions. This gives us enough time to thoroughly examine data that anti-trust laws have so far barred us access to.

“This applies in particular to information concerning sales, earnings and the number of employees by product group and plant.

“In the final analysis, the plans required for the operative business and especially for production will form the basis for the generation of synergy effects, paving the way for the emergence of a better and more efficient corporation from two top-notch companies.”

Continental is arguably best known for its tyres, being the number four tyre-maker in the world, but is even bigger in the fields of brakes, electronics, instrumentation, fuel supply systems and even interiors.

Siemens VDO is itself the product of a recent merger, the entity arising from a 2001 marriage between Mannesmann VDO and Siemens Automotive, and this year reports sales of more than 10 billion Euro (A$16.7b). It employed a global workforce of 55,000.

As a result of the takeover, Continental now ranks as one of the top five global automotive industry suppliers, with a turnover of more than 25 billion Euro (A$14.8b) and employing 150,000 people in 36 countries.