By Dominic Chopping
German tire maker Continental agreed to sell its ContiTech unit to private-equity firm Lone Star Funds in a deal that values the business at around $4.6 billion and includes potential additional payments of up to $286 million.
ContiTech manufactures products like conveyer belts and materials for vehicle interiors and has been grappling with a persistently weak market, prompting an announcement in May that around 3,000 jobs would be cut as part of a move to save 150 million euros ($171.5 million) annually from 2028. ContiTech employs over 20,000 people globally.
Continental began a structured sales process of ContiTech earlier this year and had noted strong interest from potential buyers.
In an announcement Saturday, it said it has now signed a deal to sell the unit to Lone Star Funds at an agreed enterprise value of 4 billion euros, plus potential performance-based components of up to 250 million euros in subsequent years.
Based on current plans, Continental expects the deal to generate cash proceeds of approximately 3.1 billion euros upon closing, some of which will be used to cut debt, with around 2.5 billion euros distributed to shareholders through a special dividend or a combination of share buybacks and a special dividend.
"With the planned sale of ContiTech, Continental is completing its strategic realignment and will focus on its core tires business going forward," it said.
Continental said it is assessing the impact of the transaction on the outlook for the current year and will adjust it at a later date, but noted the outlook for the tires business area remains unaffected.
The deal could be completed by the end of 2026, subject to regulatory approvals.
Write to Dominic Chopping at dominic.chopping@wsj.com