Bain acquires majority stake in Volkswagen's diesel engine subsidiary Everllence

In addition to Bain, financial investor CVC and a consortium around Swedish EQT also bid for Everllence. Insiders had recently valued the company at around 8.5 billion euros. At the end of May, Volkswagen had Everllence on its books at a valuation of around 3.4 billion euros. Bain is taking over the slim majority in Everllence.

Who bid?

Volkswagen is retaining 49 percent of the shares in the diesel engine subsidiary and declared that it wants to remain an important shareholder in the medium term. CFO Arno Antlitz said VW shareholders could benefit from the transaction in several ways: on the one hand through the strengthened substance of Volkswagen, on the other through participation in the future value and growth potential of Everllence.

The purchase is being financed through debt that is being placed on the company. The transaction is expected to be completed by the end of the year.

Embedding in the group restructuring

According to information from negotiating circles, the bidding process was also marked by the strategic interests of the Volkswagen owner families. According to insiders, the EQT consortium, which ultimately came off second best, included not only VW shareholder Qatar but also the holding company of the Volkswagen owner families Porsche and Piech.

The sale is embedded in a far-reaching restructuring of the Volkswagen Group. Volkswagen CEO Blume wants to present his concept for a sweeping reorganization of the company to the supervisory board before the summer break. By 2030, Blume aims to increase the group's return to eight to ten percent. For the current year, the target of four to 5.5 percent is only about half of that.

As part of the restructuring, capacity for a further 500,000 cars per year is to be cut in Germany. Volkswagen will announce at a later date how the money is to be spent. The group is suffering from the crisis in the Chinese automotive market and from the tariffs imposed by US President Donald Trump.

The sale proceeds give Volkswagen financial room for maneuver in a phase in which the company must also become more profitable. The stake in Everllence also secures the group's influence over a strategically important powertrain segment. In return, Bain receives a company with revenues in the billions and a broad customer base in the commercial vehicle and industrial engine business.

Significance for the location

Industry observers see the sale as a signal that Volkswagen wants to focus more strongly on its core passenger car business. Although diesel technology is considered mature, it is under pressure in the long term from alternative powertrains. With Bain as majority owner, Everllence could act more independently in the market and make investment decisions more quickly.

Observers also see the deal as a test of the long-term cooperation between Volkswagen and Bain. The carmaker has expressly emphasized that it wants to remain on board as an important shareholder in the medium term, which is intended to secure a certain say in strategic decisions.

Outlook on completion

Regardless of this, Bain is likely to push for greater operational efficiency at Everllence and improved margins. Leveraged buyout models are often associated with cost cuts and a consistent focus on profitable business areas.

With the planned completion by the end of the year, Volkswagen will initially remain owner of a slim majority until the change of ownership is carried out. Until then, antitrust reviews and contractual details still need to be clarified. If the timetable holds, the deal would be one of the largest European industrial transactions of the current year.