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Ningbo Jifeng takes over Grammer
Minimum threshold acceptable for acquisition was substantially exceeded. Rival walks away with substantial profit.
Michael Marray 15 Aug 2018

Ningbo Jifeng affiliate Jiye Auto Parts has succeeded in its takeover offer of auto interiors manufacturer Grammer. This gives Ningbo Jifeng control over the much larger company from Germany. The deal should allow the the German manufacturer to extend its activities in Asia.

The rival Hastor family from Bosnia has also decided to sell its stake. The Hastor family have had a fractious relationship with Grammer, having built up a hostile 19% stake. Ningbo Jifeng originally came in with a 25% stake as a White Knight last year to block a takeover. The Hastors own a rival auto supplier named Prevent, which in 2016 was involved in a high-profile dispute with Volkswagen that resulted in stoppages on the VW Golf assembly line.

Hastor's Cascade vehicle said in a statement on August 8 that it no longer saw any possibility of achieving its original strategic goals with Grammer. Nonetheless, the Hastor family has walked away with a substantial profit, since the Grammer share price has doubled since it built up its stake.

At the end of May, Grammer AG entered into a business combination agreement with strategic investor Ningbo Jifeng via the bidding entity Jiye Auto Parts GmbH, under which a public takeover offer was submitted to the shareholders of Grammer.

A statement said that the main purpose of the business combination agreement was to deepen the strategic partnership that was established in 2017, to additionally stabilise the shareholder structure by expanding the investor's share in Grammer AG, and to optimise the Group's global footprint and to secure its independence and global growth strategy.

The subsequent tender offer, announced on June 25, was set at 60 euros per share, and received the support of the Executive Board and Supervisory Board of Grammer. The offer put a valuation of around 780 million euros (US$890 million) on Grammer.

During the acceptance period, Jiye Auto Parts altered the conditions for acceptance, lowering the minimum acceptance threshold from 50% plus one share to 36% plus one share. As a result, the acceptance period was extended until August 6. On August 9, the bidder announced that this threshold had been substantially exceeded, with 48.45% of shares tendered, adding to the existing 25.56% stake already owned by Ningbo Jifeng. Additional shares can now be tendered until  August 23, giving the Hastor family the opportunity to sell.

The Wang family holds a majority stake in Ningbo Jifeng, which is listed on the Shanghai Stock Exchange.

In its recently announced earnings report, Grammer said that for 2018 as a whole it continues to project growth in revenue to 1.85 billion euros, as well as a further improvement in operating profitability in excess of the previous year's level, thus confirming the guidance published in the annual report for 2017 and in the first quarter of 2018.

Regionally, the Grammer Group expanded in EMEA and APAC. Revenue in the EMEA market rose slightly to 636.7 million euros due to strong growth in the Commercial Vehicles Division. Grammer again achieved strong top line growth of 12.9% to 151.9 million euros in the APAC region. Only the Americas region sustained a moderate 6.0% decline to 139 million euros, primarily as a result of lower revenue in the wake of numerous product phase-outs and ramp-ups, as well as a series of change-overs in the Automotive Division.

"The Group generally performed in line with our expectations in the first half of the year," comments Hartmut Mueller, CEO of Grammer.

"The most important event for Grammer in the last few months has been the takeover offer submitted by our strategic partner in China. After a sucessful transaction, Ningbo Jifeng will be our anchor investor, acting as an important partner for Grammer's future activities in the Asian market. At the same time, we will be able to substantially reinforce our market position in North America with the acquisition of US automotive component supplier Toledo Molding & Die Inc., which will allow us to harness the growth potential that this region will continue to offer in the future," Mueller adds.

The outlook for the second half-year 2018 is based on the current forecasts for the global economy as well as the main markets and customers. The EU-wide introduction of the worldwide harmonised light vehicles (WLTP) test procedure for passenger cars and light commercial vehicles could also have a negative impact on the sales for customers in the Automotive Division in the second half of the year. However, a specific forecast is not yet possible at this stage. In addition, recent developments with respect to trade restrictions as well as mutually imposed retaliatory custom tariffs may cloud the future outlook.

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