ATU, Germany’s largest network of auto servicing and car parts stores, has averted bankruptcy thanks to a last-minute agreement that concluded months of rescue talks.
The deal will relieve ATU shareholders Goldman Sachs, Centerbridge, Babson Capital and Caspian of an asset, which has caused the owners more than half a billion euros of their investment.
A few hours before a 21-day deadline expired on Thursday night, the negotiating parties agreed in principle to the rescue of ATU.
Sources said on Thursday evening that real estate company Lino, which owns hundreds of ATU outlets, agreed to reduce the crippling rents the company pays for its workshops, thus fulfilling the precondition that Mobivia, ATU’s French equivalent, had set on any takeover deal.
ATU confirmed this information in a statement released around midnight. “The agreement reached with our major landlords will lead to a long-term and significant reduction in annual rent,” the company said.
“We now have the opportunity to continue the path back to growth and profitability with our future owner, Mobivia Groupe,” ATU chief executive Jörn Werner said.
Mobivia will pay a purchase price of €225 million – but this is likely to flow to ATU’s creditors, not its owners.
The 11th-hour deal comes after ATU was placed under administration this week. The rents reduction paves the way for the rescue takeover of the Bavarian-headquartered company by French competitor Mobivia.
ATU said it expects the transaction to be completed this month. “There will be no insolvency,” a participant in the negotiation said.
The embattled firm, which employs 10,000 people at 600 workshops across Germany, Austria and Switzerland, has been owned by a group of hedge funds since 2013 and has been in financial difficulty for years.
Mobivia, a group based in Lille with 11,000 employees and a €1.76-billion turnover, had been in talks since September about mounting a rescue bid, but had insisted that ATU would have to renegotiate the exorbitant rental agreements on its workshops as a precondition for a deal.
Half of ATU’s servicing workshops belong to the London-based real estate company Lino, to which the chain pays more than twice the market rate for most of its rental outlets – in some cases nearly triple. Despite a healthy annual turnover of more than €1 billion ($1.1 billion), the high rents are believed to be the main reason behind the chain’s structural losses.
In October, the beleaguered company effectively declared a rent strike against what it said were extortionate rental contracts.
Now that a rescue deal is back from the brink, Handelsblatt has learned that Mobivia will pay a purchase price of €225 million, or $239 million – but this is likely to flow to ATU’s creditors, not its owners.
In the past, the company’s real estate holdings were bought by ATU founder Peter Unger, through an intermediary company which then leased them back to ATU. But in 2002 Mr. Unger sold the operational business to a financial investor and, three years later, sold ATU’s property portfolio to Lino.
As part of that deal, the rents may have been inflated in order to push up the selling price for the real estate, insiders told Handelsblatt in October. It is a common enough move in the business.
In the end, all parties lowered their demands: Nobody had any interest in an ATU insolvency.
A complicating issue was that Lino is not free to pursue negotiations by itself. It is understood that Lino requires the consent of its two lenders – Deutsche Bank and the hedge fund Davidson Kempner, who each hold half of Lino’s debts – before any deal can be finalized.
According to insiders, Deutsche Bank and Lino had demanded a one-off payment of €100 million in return for rent reductions from ATU shareholders Goldman Sachs, Centerbridge, Babson Capital and Caspian – who have already lost more than half a billion euros of their investment.
The accusation is that Deutsche Bank and Lino intended to exploit the weak position of shareholders who had given guarantees on a €160-million loan which was due to be replaced during the course of any sale.
But in the end, all parties lowered their demands, Handelsblatt learned from people familiar with the matter: Nobody had any interest in an ATU insolvency.
After finalizing its acquisition of ATU, Mobivia will employ 20,000 people in 2,000 workshops across Europe, generating turnover of €2.7 billion. However, ATU will continue to operate within the Mobivia Group under its own brand as an independent company in German-speaking countries, and will retain its headquarters in Bavaria.
Parts of this story draw from material provided by news agencies DPA and Reuters.
Axel Höpner is head of Handelsblatt’s office in Munich, focusing on Bavarian companies. Jean-Michel Hauteville, an editor at Handelsblatt Global Edition in Berlin, contributed to this report. To contact the authors: firstname.lastname@example.org, email@example.com.