German automotive supplier Continental AG has signed an agreement to sell its ContiTech plastics and rubber business to private equity firm Lone Star Funds for €4 billion (approximately $4.6 billion). The deal also includes potential performance-based payments of up to €250 million over the coming years, making it one of the company’s largest strategic divestments as it sharpens its focus on its core tyre business.
According to Continental, the transaction is expected to generate cash proceeds of around €3.1 billion, subject to customary adjustments. The company also announced plans to return a significant portion of the proceeds to investors, stating that approximately €2.5 billion will be distributed to shareholders after the transaction is completed. The sale remains subject to regulatory approvals and is expected to close by the end of 2026.
The divestment marks a major strategic shift for Continental as it restructures its business to concentrate on areas with stronger long-term growth potential. By exiting the industrial plastics and rubber segment, the company intends to strengthen its leadership in the global tyre market while simplifying its overall business operations. Continental said the outlook for its tyre division remains unchanged despite the sale and that the business will continue operating according to its existing strategy.
The ContiTech division manufactures a wide range of rubber and plastic products for industrial customers, including conveyor belts, hoses, sealing systems and specialised components used across multiple sectors beyond the automotive industry. However, the business has faced mounting challenges in recent years due to weaker industrial demand, rising operating costs and restructuring pressures.
Earlier this year, Continental announced plans to reduce annual costs by €150 million from 2028 within the ContiTech division. As part of that restructuring programme, the company also revealed 3,000 job cuts, including approximately 1,600 positions in Germany, highlighting the operational difficulties the business has been facing. The sale to Lone Star Funds is expected to provide the division with a new ownership structure focused on long-term operational improvements and future growth.
Continental said it is currently evaluating the financial impact of the transaction on its guidance for the current fiscal year. While the company did not revise its earnings outlook immediately, it indicated that further details would be shared once the assessment is completed. Importantly, management emphasised that the company’s tyre business—its primary focus following the sale—remains unaffected by the transaction.
Reports suggesting a deal between Continental and Lone Star had surfaced earlier this week, with sources indicating negotiations were nearing completion. The official announcement confirms those reports and represents another example of large industrial groups streamlining operations to focus on core businesses while private equity firms continue targeting established manufacturing assets with long-term value creation potential.
If completed as planned, the transaction will represent a significant milestone in Continental’s ongoing transformation strategy, allowing the company to strengthen its financial position, reward shareholders and concentrate resources on expanding its global tyre business in an increasingly competitive automotive market.
Disclaimer: This report has been editorially prepared using publicly available information and agency inputs. While every effort has been made to ensure accuracy, unintentional errors or omissions may occur. Readers are encouraged to verify critical information from official sources.
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