Continental AG has agreed to divest its ContiTech group sector to Lone Star Funds for a headline price of €4.0 billion, together with potential additional performance-linked payments of up to €250 million payable in later years. The deal marks a formal exit by the Hanover-headquartered automotive and tyre supplier from its industrial operations.
Continental said it expects to receive approximately €3.1 billion in cash at the time of closing. The company cautioned the ultimate proceeds will be subject to customary purchase-price-adjustment mechanisms and the timing of the transaction, which will determine the final cash flow at completion.
The transaction remains conditional on regulatory approval from competition authorities and could close by the end of 2026 if clearances are obtained and timing aligns with the parties' expectations.
Management indicated the intended use of proceeds would prioritize lowering financial indebtedness. After reducing debt, Continental plans to return an estimated €2.5 billion to shareholders through a special dividend or through a combination of share buybacks and a special dividend. The company did not set a firm distribution mechanism pending further review and shareholder decisions.
Analysts at Citi assessed the implied deal valuation as supportive of a move in Continental shares toward the €80 level, consistent with the broker's target price. Their view was based on a base-case valuation assumption for the tyre business of 8.5 times enterprise value to EBIT.
Citi's team also said public debate about how Continental will allocate the proceeds is likely to be deferred until the company's second-quarter results, scheduled for August 4. They noted that share performance could receive further support should a European Commission tariff decision on Chinese imports, expected around mid-July, be favourable to market expectations.
With the sale of ContiTech, Continental described the move as the completion of its strategic realignment, enabling the company to focus on its core Tires business. ContiTech will be classified as a discontinued operation starting with Continental's half-year financial report.
The company is evaluating how the transaction will affect its full-year outlook and said it will update guidance at a later date. Continental reiterated that the outlook for its Tires business remains unchanged by the transaction announcement.