September 2, 2019 / 1:06 PM / 16 days ago

Continental readies Powertrain spin-off in addition to listing

FILE PHOTO: Logo of Continental is seen before the annual news conference in Hanover, Germany March 2, 2017. REUTERS/Fabian Bimmer

FRANKFURT (Reuters) - Auto supplier Continental (CONG.DE) on Monday said it would prepare a spin-off of its Powertrain division as an alternative to a listing, giving the German company additional options for separating the unit amid worsening market conditions.

Continental wanted to list its Powertrain division in summer 2019, but in April the Hanover, Germany-based company reported a sharp drop in profits and pushed back plans for a stock market listing, blaming a downturn in auto production.

With a spin-off, the implementation of a new corporate structure will not be dependent on the volatile stock market.

“The Executive Board of Continental AG has decided to consider a spin-off of up to 100% of the Powertrain division with subsequent listing as an additional alternative to the potential partial IPO,” the company said in a statement.

Continental said that although a partial IPO of the division was its preferred option, it would review whether a legal separation without raising fresh capital was an alternative way forward.

The auto markets have shown little sign of recovery, with sales in China - the world’s largest car market - showing no indications of improvement, hitting the profits and share prices of a raft of car manufacturers and suppliers.

“This approach ensures that our Powertrain business will be able to embark on its promising course under the best possible conditions in 2020, regardless of whether it does so via a partial IPO or a spin-off,” Continental CEO Elmar Degenhart said.

Continental, which makes auto parts and tyres, will break itself up into three divisions: Continental Rubber, Continental Automotive and Powertrain, under a new holding company structure starting in 2020.

The restructuring separates Continental’s autonomous and connected vehicle technologies businesses from its diesel and petrol engine technologies division.

Reporting by Edward Taylor; Editing by Michelle Martin

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