ITT's brake, chassis unit sold for $1.93 billion Brake-maker being sold to German company is world's third-largest

Acquisitions

July 28, 1998|By BLOOMBERG NEWS

HANOVER, Germany -- Continental AG agreed yesterday to buy ITT Industries Inc.'s brake and chassis unit for $1.93 billion in cash, helping the world's fourth-largest tire-maker diversify its business.

The German maker of Uniroyal and General tires plans to finance $386 million of its biggest acquisition by selling new shares. It will raise $1.16 billion through bond sales and loans, and will use cash reserves for the rest.

The purchase of ITT Automotive Brake and Chassis, the world's No. 3 supplier of brakes, will boost Continental's sales 36 percent and let it develop more advanced wheel and brake systems.

ITT Industries, which is shrinking its auto-parts business to focus on more profitable electronics and pumps, chose Continental over rival bidders Ford Motor Co. and Tenneco Inc.

"Continental will be less dependent on tires and will be able to offer complete auto parts systems," said Christian Breitsprecher, an analyst at HSBC Trinkaus.

Continental's shares rose 2.4 marks, or 4.3 percent, to 58.9. Its 32 percent climb in the past 12 months was just behind the 35 percent gain for the DAX composite auto index. ITT Industries stock fell 25 cents to close at $32.9375 yesterday but has gained 32.4 percent in the past year, exceeding the 22 percent climb in the Standard & Poor's 500 index.

ITT Industries plans to spend up to $1 billion on a share buyback from the $2.6 billion in cash it will receive, after taxes and expenses, from the sale of both auto-parts units. The program will begin this year and be completed at the end of 1999. ITT Industries Chairman Travis Engen said the company might pay more than $1 billion after evaluating the repurchase.

Continental generates about 70 percent of its business from tire sales. The transaction, subject to European and U.S. antitrust approval, is expected to be completed before the end of the year.

ITT Industries sold its electrical auto-parts unit last month to France's Valeo SA for $1.7 billion, in a move away from the auto-parts business.

Pub Date: 7/28/98

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