Schaeffler’s $3.8 billion acquisition of Vitesco Technologies, both family-controlled German companies, comes at a time when the auto industry faces challenges from the transition to electric vehicles and increased competition from China. However, the merger makes strategic sense for Schaeffler as it aims to expand its sales in the electric vehicle market.
With Vitesco’s expertise in devices that convert direct current to alternating current, Schaeffler hopes to increase its sales from electric cars to up to 30% of the group’s total by 2030. The acquisition will be carried out through a tender for the 50% of Vitesco’s stock not already owned by the family, followed by a merger with the remaining shares.
According to calculations by Breakingviews using LSEG data, Vitesco’s forecast operating profit after tax in 2024 suggests a 13% return on invested capital based on the implied enterprise value of €3.7 billion from the tender price. In addition, cost synergies could be worth €3.5 billion in present value terms.
As part of the merger, Schaeffler plans to adopt a more shareholder-friendly structure with equal voting rights. This change is aimed at increasing the value of underperforming units like industrial bearings or vehicle repairs. The potential for these synergies, combined with the premium offered to shareholders, suggests that those who choose not to cash out immediately may have something to celebrate. However, Schaeffler hopes that enough shareholders will take the upfront cash payment.
The acquisition of Vitesco Technologies by Schaeffler is a clear indication of the auto industry’s shift towards electric vehicles. With the expertise and resources of both companies combined, they aim to position themselves as leaders in the growing market. This merger will not only benefit the companies involved but also contribute to the advancement of electric vehicle technology as a whole.
More detail via Reuters here… ( Image via Reuters )