* Purchase ranks among Continental's biggest-ever deals
* Contitech can imagine further acquisitions -division chief
* Fitch sees no immediate impact on Continental's ratings
By Andreas Cremer
BERLIN, Feb 10 German tyre and car parts maker
Continental has agreed to buy U.S. private equity
investor Carlyle Group's Veyance Technologies, which once
belonged to its rival Goodyear, for 1.4 billion euros
Veyance, which employs 9,000 workers at 27 plants worldwide
producing industrial hoses and belting, will be integrated into
the German company's Contitech division, Continental said.
"Veyance will make an immediate positive contribution to the
company's profitability," Chief Executive Elmar Degenhart said,
adding that the purchase will be paid for from cash and
available credit lines.
Contitech can imagine further acquisitions after the
purchase of the U.S. competitor, which will raise the share of
non-automotive sales at Continental to 32 percent of group
revenue from 28 percent, still short of a 40-percent goal,
division chief Heinz-Gerhard Wente said on a conference call.
Continental expects group sales to rise by more than 5
percent this year to about 35 billion euros as world auto
markets recover, the company said last month.
The company aims for its adjusted operating margin to stay
"comfortably" above 10 percent, after 11.2 percent in 2013. It
is due to publish full results for 2013 on March 6.
Carlyle bought Veyance from Goodyear Tire and Rubber Company
in 2007 for $1.475 billion and was licensed to continue to use
the Goodyear Engineered Products brand for its range of belts,
hoses and other products.
The addition to Contitech, which accounts for more than 10
percent of Continental's 2013 sales of 33.3 billion euros, will
increase the company's presence in the United States and South
America and create other opportunities overseas, Wente said.
Combined with Veyance, Contitech will have 39,000 employees
and sales of about 5.4 billion euros. Veyance generated more
than half of its $2 billion 2013 sales in North America.
The deal, the closing of which is not expected before late
September, may create synergies worth about 75 million euros in
the next four years, Wente said.
Fitch Ratings said on Monday that the purchase will have no
immediate impact on Continental's ratings.
"The negative effect on credit metrics is modest and should
be offset by the mildly positive impact on the group's business
profile," the firm said.
Barclays and Latham & Watkins LLP were financial and legal
advisers to Carlyle. Freshfields Bruckhaus Deringer LLP served
as a legal adviser to Continental.
The acquisition announced on Monday ranks among
Continental's biggest deals to date and is Contitech's largest
purchase by sales volume, a spokesman said.
In 2007 Continental bought Siemens's VDO automotive division
for 11.4 billion euros, still the biggest purchase in the
company's 142-year history.
A year earlier, Continental acquired the automotive
electronics unit of Motorola Inc for $1 billion to expand in