renovation - Radical cure at Varta - Shareholders should be emptied out
The situation at struggling battery company Varta is becoming critical. In its fight for survival, the company is now resorting to drastic measures: Old shareholders are to be pushed out of the company, creditors are asked to waive a large portion of their money and claims. Investors are also being sought. With these measures, Varta hopes to prevent a possible insolvency, it was reported.
To implement these plans, Varta announced on Sunday that it would file for insolvency proceedings under the German Corporate Restructuring and Reorganization Law (StaRUG) at the Stuttgart District Court. A court spokesperson confirmed on Monday that such a filing had been made.
Varta has been in crisis for a long time
The battery manufacturer has been in crisis for a long time due to poor business performance. The demand for small lithium-ion button cells, for example for headphones, is fluctuating strongly. In addition, Varta complained of cheap competition from China and persistent supply chain problems. To make matters worse, hackers attacked Varta's computer systems in February, paralyzing production for several weeks.
The stock price has therefore been declining for a long time. In June, Varta had to abandon its sales targets due to lack of demand. Previously, the company had also had to admit that its own restructuring concept no longer sufficed to return to a profitable growth course as planned by the end of 2026.
Shareholders to be emptied out
New restructuring plans are now on the table. And they have consequences, especially for shareholders: The plans call for Varta shares to be taken in without compensation first. In a second step, the capital is to be increased and new shares issued. However, all previous shareholders would be excluded from a buyout, according to Varta's assessment.
The existing shareholders are unlikely to agree to the loss of their shareholding and complete exclusion from the company, Varta estimates. Therefore, the procedure with the complicated name: Its purpose is to prevent an operationally viable company from slipping into bankruptcy. Resistance from individual creditors, but also from shareholders, can be countered.
The stock plummeted on Monday, losing up to 80 percent of its value. It was only worth a few euros. For comparison: The price was over 180 euros at the beginning of 2021.
Rescue from Stuttgart-Zuffenhausen?
The procedure is intended to serve as the basis for the new setup of Varta. However, the Swabians also need a large amount of money in the high two-digit million range for this. Financing from financial creditors and investors is also planned, it was reported.
Currently, negotiations are taking place - among others, with the former majority owner Michael Tojner and sports car manufacturer Porsche. At the beginning of the month, it became known that Volkswagen's daughter company was in talks with Varta about acquiring its e-car battery business. The two companies work closely together on high-performance battery cells.
The Zuffenhausen negotiations were confirmed: "Our goal with our engagement would be to obtain this key technology at the German location," they said. A healthy financial basis of Varta is a prerequisite for this: "Under certain circumstances, we could also imagine participating in the financial restructuring of Varta AG as a whole." Varta's cells are supposed to be used in the 911er series.
Restructuring involves a debt cut
Moreover, there is supposed to be a debt cut. According to reliable sources, the debts that Varta owes to major creditors such as banks and hedge funds amount to approximately half a billion Euros. Creditor representatives therefore demand to be closely involved in the planned rescue measures.
According to the majority shareholder Tojner, this procedure is the only option to give the company a good perspective. "Together with management, all alternatives were weighed, the decision was not an easy one." The most important goal was to reduce the debt burden. The running business cannot be stabilized with the available capital. "We have to take this step to give Varta a future, secure almost 4,000 jobs, and keep the company as an economic factor in the region and above all as a technology carrier for Europe."
- Varta's struggling electronics business is seeking drastic measures to prevent insolvency, including pushing out old shareholders, waiving debts, and attracting new investors.
- The company announced on Sunday that it would file for insolvency proceedings under the German Corporate Restructuring and Reorganization Law (StaRUG) at the Stuttgart District Court.
- market for small lithium-ion button cells for consumer goods, such as headphones, has been volatile, and cheap competition from China and supply chain issues have added to Varta's problems.
- The restructuring plan includes taking in Varta shares without compensation, followed by issuing new shares and excluding previous shareholders from a buyout.
- Resistance from creditors and shareholders can be anticipated, but the goal is to prevent Varta from sliding into bankruptcy.
- The stock price plummeted on Monday, losing up to 80% of its value, and negotiations are currently underway with potential investors and creditors, including Porsche and Michael Tojner.
- Porsche is interested in acquiring Varta's e-car battery business to secure a key technology at the German location and potentially participate in the financial restructuring of Varta AG as a whole.
- Creditors demand to be closely involved in the rescue measures due to Varta's debts, which are estimated to be approximately half a billion Euros, owed to banks and hedge funds.
