German Tire Giant Continental Sells ContiTech Division for 4 Billion Euros
German tire manufacturer Continental announced on Saturday that it has signed an agreement to sell its ContiTech division, which produces rubber and plastic products for industrial clients, to private equity firm Lone Star Funds. The deal is valued at 4 billion euros, with an additional performance-based component that could add up to 250 million euros in the coming years. The transaction is expected to close by the end of 2026. Continental anticipates receiving approximately 3.1 billion euros in cash proceeds, subject to customary adjustments. Part of these funds will be used to reduce debt, and after the deal's completion, Continental plans to distribute around 2.5 billion euros to shareholders.
The sale of ContiTech aligns with Continental's strategic focus on its core tire business. The company is currently assessing the impact of the sale on its financial outlook for the current fiscal year but emphasized that its tire business forecast remains unchanged. This move is part of a broader restructuring effort initiated in recent years amid challenges in the European automotive sector. Last year, Continental spun off its automotive components division, which includes braking systems and sensors, into a separate company named Aumovio. Concurrently, the company has reduced operations and announced thousands of job cuts over recent years.
ContiTech itself has faced pressure recently, announcing a cost-saving plan targeting annual savings of 150 million euros starting in 2028 and revealing in May a workforce reduction of 3,000 employees, including 1,600 in Germany. Reuters reported a day before the official announcement that the parties were nearing a deal. The German and European automotive industries have been grappling with increased competition from Chinese manufacturers, weak demand in key markets, and challenges related to the transition to electric vehicles, prompting many manufacturers and suppliers to accelerate efficiency and restructuring plans.
