Volkswagen to sell diesel engine unit to Bain in deal generating €7.4 billion
By Christina Amann and Rachel More
Volkswagen's Sale of Everllence: Key Details and Implications
Overview of the Deal
June 24 (Reuters) - Volkswagen has agreed to sell its diesel engine unit Everllence to Bain Capital in a deal generating proceeds of about €7.4 billion ($8.4 billion), beating out other private equity firms including one that had joined forces with Volkswagen's top shareholders.
The leveraged buyout deal is expected to be one of European industry's biggest carve-outs this year. Volkswagen has been seeking to free up cash at a time of deep cuts across the group's automotive operations.
What is a Leveraged Buyout?
A leveraged buyout is a deal in which a company is acquired largely with borrowed money.
Strategic Rationale and Future Plans
Growth Opportunities for Everllence
"Leaner structures and processes will give Everllence the opportunity to achieve further growth in attractive markets such as data centers, the energy sector and shipping. At the same time, it will allow us to focus even more strongly on our core business," said Volkswagen CEO Oliver Blume.
Ownership Structure Post-Deal
Volkswagen has entered an exclusive arrangement with Bain to sell a 51% stake in Everllence and will in the medium term remain a major shareholder with a 49% stake, the German automaker said in a statement on Wednesday.
Bidding Process and Stakeholders
Competing Bidders
Bain was competing against CVC and EQT in the bidding race, the latter of which was part of a consortium with Porsche SE and Qatar.
Major Shareholders in Volkswagen
Porsche SE holds 53.3% of voting rights in Volkswagen, while Qatar holds 17% via its sovereign wealth fund.
Everllence's Business and Market Potential
Product Portfolio and Market Expansion
The business, formerly MAN Energy Solutions, makes diesel engines for the shipping industry but also sees growth potential in artificial intelligence through demand for generators to power data centers.
Transaction Conditions and Timeline
Regulatory and Employee Considerations
The transaction is subject to employee negotiations and regulatory hurdles, which Volkswagen aims to complete by the end of the year, the statement said.
Site Retention Commitments
As part of the deal, the company's sites in Augsburg, Oberhausen, Berlin, Hamburg and Ravensburg will be retained under the new ownership structure at least until the end of 2030.
Financial Impact
Book Value of Everllence
As of May 31, the book value of Everllence on Volkswagen's balance sheet was about €3.4 billion.
Currency Conversion
($1 = 0.8806 euros)
Reporting Credits
(Reporting by Ananya Palyekar in Bengaluru, Chris Thomas and Mrinmay Dey in Mexico City; Editing by Sahal Muhammed, David Gregorio and Chris Reese)
