FAIRLAWN, Ohio—Very few hurdles remain in Continental A.G.'s path to purchase Veyance Technologies Inc. from the Carlyle Group, which will significantly expand its presence across the globe.
But the process has been much slower than the company anticipated.
It overcame a big roadblock in December when it received conditional approval from the U.S. Department of Justice to finalize the acquisition of the multifaceted rubber product producer. The condition requires that it divest Veyance's air spring business in the NAFTA region, an air springs plant in San Luis Potosi, Mexico, and a technical office in Ohio.
ContiTech reached the deal to purchase Fairlawn-based Veyance last February for $1.91 billion. ContiTech posted sales of $5.3 billion in 2013 while Veyance had $2 billion.
Divesting the air springs operation is a major concession on the part of Continental because “in our estimation that would have brought clear benefits for our customers,” said Heinz-Gerhard Wente, a member of Continental's executive board and CEO of ContiTech A.G., a division of Continental and the operation that will gain the most from the acquisition of Veyance.
In addition to the U.S., antitrust authorities in Canada and Mexico cleared the acquisition in December. Mexico's approval was also conditional on the sale of the air springs business in the NAFTA region. The company already had received approval from antitrust agencies throughout Europe.
However, two other regulatory authorities—Brazil and Chile—still are reviewing the proposed acquisition and have yet to make final decisions.
Brazilian authorities review mergers and acquisitions in a two-stage antitrust process, a ContiTech spokesman said. Up until now, the planned acquisition has been dealt with at the first level, he said. “The detailed review is now in the hands of the second level, the Tribunal.”
Continental officials had hoped to close the deal by the end of 2014. It now hopes the transaction will receive final approvals within the next three months, the spokesman said. It can finalize the deal and sell the plant in Mexico within that span or a little later, he said.
Continental welcomed the decisions by the U.S., Mexican and Canadian antitrust authorities, Wente said.
“We will now look for a buyer as quickly as possible who will provide a secure future for the approximately 500 employees in the plant in Mexico and develop the business further,” he added.
The Mexican plant is the only air springs facility that will be sold, as it is the lone one Veyance operates within the NAFTA region, the spokesman said.
Continental will continue to cooperate in every way possible with antitrust authorities in Chile and Brazil “to help in reaching a decision quickly so that our customers and employees know exactly where we stand,” according to Wente, who plans to step down from his executive posts April 30 after 40 years with the Hanover, Germany-based company.
Hans-Juergen Duensing, who has worked for ContiTech for more than 20 years, will replace Wente on the executive board and as head of ContiTech, effective May 1.
“The assessment of the (U.S., Canadian and Mexican) antitrust authorities with positive rulings shows that the acquisition will not have an adverse impact on the markets,” Wente said.
Continental's acquisition of Veyance is aimed at strengthening ContiTech's industrial operations, the company said.
It also will help the firm in markets where it is not presently represented or has a small base, particularly in the U.S. and South America, Continental said.
The addition of Veyance also will provide additional opportunities for the German headquartered company in Canada, China, Australia and South Africa.