A.T.U., one of Germany’s largest tyre and car parts retailers, is once again for sale. According to information from market observers, the company is battling serious financial difficulties.
US-based private investment firm Centerbridge Partners, whichacquired a controlling share in A.T.U Auto-Teile-Unger GmbH & Co. KG from Kohlberg Kravis Roberts (KKR) at the end of 2013, has now contracted German restructuring expert Hans-Joachim Ziems. The presence of Ziems doesn’t bode well for A.T.U., which sells around 3.5 million tyres in Germany each year.
Several factors have influenced A.T.U.’s financial woes. The retailer’s financial position depends heavily upon its winter tyre business, and a poor winter tyre season – such as those Germany has experienced in the last few years – can have a catastrophic effect upon turnover. A.T.U. has also faced high annual rental costs following KKR’s sale of company-owned properties. German newspaper the Frankfurter Allgemeine Zeitung recently reported that rental costs totalled €115 million in 2014. As former CEO Norbert Scheuch commented last year, rental costs were like a “millstone” around the company’s neck, however an ATU spokesperson shares that the retail chain has negotiated a “significant rent reduction” since then.
In spite of this relief, A.T.U. remains in the red. Reputable sources indicate it recorded a loss of €50 million during 2015. For the 2014/15 financial year, which ran from 1 July 2014 to the end of the following June, the net loss amounted to €51.8 million, with the minus figures coming solely from the first half of 2015 – in the “abridged financial year 2014” the company made a profit of €485 million thanks mainly to “extraordinary income from debt relief” in connection with the A.T.U. Group’s financial restructuring.
A.T.U. management confirms that Centerbridge now intends to sell A.T.U. on. “A.T.U. is currently involved in talks with potential strategic investors,” a company spokesperson told the Frankfurter Allgemeine Zeitung. “We’re counting on closing a transaction by the end of the year.” Centerbridge and A.T.U. co-owners Babson Capital and Goldman Sachs Investment Partners have appointed Hans-Joachim Ziems to guide the current “transformation process” in the run-up to a sale. Ziems specialises in the “restructuring of companies in crisis situations” and now holds the position of chief restructuring officer at A.T.U.