Chinese auto parts group Ningbo Jifeng on Monday officially made a bid of €60 ($70) per share to buy Grammer, a German maker of vehicle seats, armrests and headrests, of which it already which owns 25 percent. Grammer’s management board supports the offer, which would also entitle existing shareholders to a 2017 dividend of €1.25.
The companies have been cooperating since last year when Ningbo Jifeng stepped in as a white knight and took a 10 percent stake to block a hostile takeover attempt by Prevent, a German-Bosnian auto supplier. The Chinese firm said it wants to be a silent partner and exert no influence on Grammer’s management. It doesn’t plan to increase its stake beyond 50 percent.
But Prevent, which is controlled by the Hastor family and is Grammer’s second-largest shareholder with a stake of about 20 percent, has dismissed the offer as too low. The Hastors believe Grammer is worth €80 to €100 per share, or more than €1 billion. “We will now review all available options including another increase of our stake,” a Prevent spokesman said.
Prevent has expressed doubts whether Ningbo Jifeng, with annual revenue of €250 million, can afford Grammer, which had an operating profit of €67 million on sales of €1.8 billion last year. Prevent suspects that Ningbo Jifeng’s offer is backed by the Chinese government.
It remained unclear whether a bidding war could emerge. Some investors had been betting on one when Ningbo Jifeng announced its intention to make an offer last month. Its shares hit a high of €67.10 on May 31, but had since fallen to €61 on Tuesday morning.
There’s no sign at present that Ningbo Jifeng is ready to increase its offer and encourage Prevent to sell its stake, so it will have to rely on independent shareholders for its takeover to succeed. If the takeover fails, the share price could fall sharply.
Prevent has gained a reputation for aggressive business practices by waging lawsuits against companies including VW and Daimler. It has resorted to halting deliveries in past disputes and in 2016 caused VW to halt production in six plants. Grammer suffered order cancellations from automakers when Prevent acquired its stake in the company because they were worried that Grammer may also resort to stopping supplies.
Even though the German government is wary of Chinese firms acquiring sensitive technology, there has been no objection to Ningbo Jifeng’s acquisition. The firm is reported to have pledged to avoid job cuts among Grammer’s 13,000 employees for 7.5 years.
Stefan Menzel covers the auto industry for Handelsblatt. To contact the author: firstname.lastname@example.org