FAIRLAWN, Ohio—ContiTech A.G. is on course to more than double the size of its rubber hose and belt operation in North America while significantly boosting its overall presence across the globe.
Continental A.G., ContiTech's parent, opened the door to that possibility when it announced Feb. 10 that it had agreed to buy major competitor Veyance Technologies Inc. from the Carlyle Group, a private equity firm, for about $1.91 billion.
That is roughly $440 million more than the amount Carlyle paid for Veyance when it purchased the business in 2007.
Expected to close late in the third quarter or the beginning of the fourth quarter, the transaction, which will be financed from cash and available credit lines, is subject to the approval of antitrust authorities.
But once Conti gets the nod, the deal will pair two of the largest belt and hose makers in the world and give ContiTech much larger air spring, rubber track and power transmission belt businesses.
That is especially true in the U.S. and other parts of the Americas, where Veyance has a major foothold. It generates about half its $2 billion in annual sales in the U.S. and has a strong presence in Latin America, where it pulls in about 16 percent of its revenues, a ContiTech spokesman said.
ContiTech is a big player in Europe, where it garners about 66 percent of its overall sales, which were about $5.3 billion in 2013. The firm is a far smaller player in North America.
It is important to have balance for the stability of a company, said Heinz-Gerhard Wente, CEO of the ContiTech division and a member of Continental's executive board. Bringing Veyance into the fold ties in with ContiTech's growth strategy, he said.
"We're quite pleased with what we've accomplished over the last seven years," said John Hamilton, president and CEO of Veyance since November 2010. Its recent performance, along with its 100 years of success and growth operating as Goodyear Engineered Products, made the company an attractive opportunity for ContiTech, he said.