...October 18, 2023 This report does not constitute a rating action. PARIS (S&P Global Ratings) Oct. 18, 2023--S&P Global Ratings today said Schaeffler AG's (##+/Stable/--) announced merger plans would leave key credit metrics within ratings thresholds. Schaeffer is looking to merge with Vitesco Technologies AG (the powertrain division spin-off from Continental AG in September 2021) through a three-step process that should be complete by December 2024. Although the transaction would have a dilutive impact on Schaeffler's profit margins and free cash flow in 2024-2025 due to Vitesco's lower operating profitability and integration costs, we expect that IHO Group's (Schaeffler is a 75% owned subsidiary of IHO Verwaltungs GmbH) debt to EBITDA would remain well below 4.5x and its funds from operations (FFO) to debt would continue to comfortably exceed 15%, levels we consider commensurate with our rating on Schaeffler. In our base-case scenario, we assume a full take-up of the tender offer by Vitesco's...
