Schaeffler to sell 4 pct of Continental AG to cut debt

FRANKFURT, Sept 16 Mon Sep 16, 2013 6:31pm EDT

FRANKFURT, Sept 16 (Reuters) - German auto parts maker Schaeffler Group said it will sell 4 percent of Continental AG to cut debt, taking advantage of a 20-year high in the Continental share price.

Schaeffler is placing 8 million shares with investors to pay creditors, including Goldman Sachs, which is also running the transaction, it said on Monday after the close of trading in Germany.

The shares are worth about 1 billion euros ($1.3 billion)after the stock price of auto parts maker Continental AG climbed to 126.95 euros on Monday, its highest in more than 22 years, according to Thomson Reuters data. Prior to the sale, Schaeffler holds just under half of the stock in Hanover-based Continental.

Privately held Schaeffler plans to use an additional 325 million euros from its free cashflow to reduce liabilities, it said.

Placing large amounts of shares with investors usually requires a discount. The company plans to announce the exact result of the transaction on Tuesday, a Schaeffler spokesman said.

The share placement is one of several measures to cut debt after Schaeffler's debt-financed takeover bid for Continental in 2008 caused liabilities to soar. In July, Schaeffler said it signed a new credit agreement worth 3.9 billion euros.

Schaeffler's net debt stood at 6.5 billion euros at the end of June.

The maker of ball bearings and clutches agreed not to sell any more Continental shares for 180 days and confirmed it considers the holding a "long-term strategic participation."