Continental AG hires JP Morgan for possible break-up

Continental AG has hired JP Morgan to recommend on a possible break-up, sources informed Reuters, as the car parts maker rearranges for a market focused on electric and self-driving automobiles.

The U.S. investment bank has been mandated by the Hanover-based part and tyre maker to deal with strategic alternatives, consisting of a separation of its existing companies, three people knowledgeable about the discussions stated.

Continental and JP Morgan both refused to comment on the bank’s role.

“We are making use of expertise however are still basically at the start of the process,” Continental CEO Elmar Degenhart stated at the Detroit auto show.

Continental stated last week that it was in discussion about a possible structural overhaul, confirming media reports, and promised to flesh out its plans under six months.

With the auto market wrapped up in a strategic transition to zero-emission and autonomous automobiles, automakers and providers are adjusting their companies and spinning off operations to focus better on new technologies.

Daimler has said it may divide into separate legal entities, which could enable a partial listing to raise funds to invest in future mobility technologies and services.

Parts makers such as Delphi and Autoliv have spun off departments or announced strategies to do so, cheered by investors who see combustion-engine vehicles as a sunset industry.

Continental has stated software and electronic devices are the most significant development drivers for the group, which also makes fuel-injection and transmission-control systems. It prepares to increase sales to over 50 billion euros ($61 billion) by 2020.

In the interview, Degenhart stated structural change might be needed to provide on Continental’s goal of surpassing international auto production growth by 4-5 percentage points.