Continental and Pirelli clash

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The Independent Online
THE LONG-running battle between Pirelli, the Italian tyre firm, and Continental, its German rival, escalated yesterday as Pirelli blocked plans by Continental to raise its share capital in preparation for a rights issue.

Pirelli also threatened legal action over Continental's refusal to allow holders of 34.5 per cent of its shares to vote at its annual meeting in Hannover.

The block on voting ensured that a second motion, proposed by Pirelli, seeking to end Continental's restriction on any shareholder voting for more than five per cent of the equity, was rejected.

Continental claimed that the 34.5 per cent stake was effectively owned by Pirelli as it had indemnified the holders against losses and agreed to buy the shares back within three to five years. Continental would only accept a vote on the five per cent stake owned directly by Pirelli.

But Garb Silber-Benz, head of Pirelli's German subsidiary, insisted that Pirelli had demonstrated there was no connection between itself, its merchant bank Mediobanca - which also holds five per cent of Continental - and the other shareholders.

'They are just call options; therefore the shares of the shareholders are not held for the account of Pirelli,' he said.

'The decision means that the result of the votes in this assembly will not be determined correctly. Pirelli will not accept this but will have the courts decide what really was resolved.'

Excluding the Pirelli shareholdings, only 20 per cent voted in favour of abandoning the limitation. Opposition from Pirelli and other shareholders ensured that voting in favour of the proposal to increase capital fell well short of the 75 per cent needed.

The votes marked the culmination of a meeting at which shareholders queued to criticise everything from Continental's management and Pirelli to the capitalist system and the role of German banks.

The proceedings almost degenerated into farce as Ulrich Weiss, chairman of the supervisory board, announced that a majority of shareholders had voted against ratifying the actions of his board in 1991. After three false starts and much confusion, he revealed that the 'yes' votes had inadvertently been counted as 'nos'.

The battle between the two companies started two years ago when Pirelli approached Continental about a merger. The approach was initially rejected, and although negotiations were reopened last spring, they were abandoned in November when the two groups concluded they should concentrate on restructuring their own businesses.