Varta will pressure shareholders from companies
Varta Battery Corporation Faces Crisis: Old Shareholders to Concede Claims, Insolvency Proceedings Announced
The situation at struggling battery manufacturer Varta is becoming increasingly critical. In its fight for survival, the company is now resorting to more drastic measures: Old shareholders are to be forced out, creditors are to waive a significant portion of their money and claims. Investors are also being courted. With these measures, Varta hopes to avert the possibility of insolvency, it was reported.
To implement these plans, Varta from Ellwangen has announced that it will file for insolvency proceedings at the competent Stuttgart District Court under the German Corporate Restructuring and Reorganization Law (StAReg). A court spokesperson confirmed that such a filing had been made.
Varta has been in crisis for some time due to declining business. The demand for small Lithium-Ion button cells, for example for headphones, is fluctuating strongly. Furthermore, Varta recently complained about cheap competition from China and ongoing 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 some time. In June, Varta had to abandon its sales targets due to a lack of demand. Previously, the company had also had to admit that its own restructuring plan no longer sufficed to return to a profitable growth course as planned by the end of 2026.
Anxiety over Total Collapse
New restructuring plans are now on the table. And they have consequences, especially for shareholders: The plans call for the withdrawal of Varta shares without compensation in the first step. In a second step, the capital is to be increased and new shares issued. However, all previous shareholders would be excluded from purchasing new shares, according to Varta's assessment.
Existing shareholders are unlikely to agree to the loss of their shareholding and complete expulsion from the company, Varta estimates. Therefore, the complex procedure with the confusing name: Its purpose is to prevent an operationally viable company from sliding into bankruptcy. Resistance from individual creditors, but also shareholders, can be countered.
The stock price plummeted in anxiety. At one point, it had dropped by around 80 percent. The paper was only worth a few euros. For comparison: At the beginning of 2021, the price was over 180 euros at its peak.
The procedure is intended to provide the foundation for Varta's new setup. The Swabians also need a large amount of money in the high, two-digit million range for this. To cover the costs, the involvement of financial creditors and investors is also planned, it was reported. Negotiations on this are currently underway - among others, with the previous majority shareholder Michael Tojner and sports car manufacturer Porsche.
"Important Goal: Reduce Debt Load"
At the beginning of the month, it became known that the Volkswagen subsidiary was in negotiations with Varta over the acquisition of its e-car battery business. The two companies have been working closely together on high-performance battery cells. The representatives from Zuffenhausen confirmed the negotiations: "Our goal with this engagement would be to obtain this key technology in Germany," they said. A healthy financial basis of Varta is a prerequisite for this: "Under certain circumstances, we could also consider participating in the financial restructuring of Varta AG as a whole." Varta's cells are to be used in the 911er model series.
Furthermore, there is to be a debt restructuring. According to rumors, Varta owes creditors, such as banks and hedge funds, nearly half a billion Euros in debts. Creditor representatives are demanding to be closely involved in the planned rescue measures. The majority shareholder Tönnies stated that this procedure is the only way 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 4000 jobs, and keep the company as an economic factor in the region and above all as a technology carrier for Europe."
Given the financial struggles of Varta, negotiations with potential investors such as Porsche are underway to secure the necessary funds for its turnaround. The insolvency proceedings announced in Stuttgart aim to provide Varta with a financial restructuring, ultimately allowing the Swabian company to reduce its significant debt burden and safeguard over 4000 jobs. Despite the drop in Porsche's stock prices due to investor anxiety, its involvement could potentially benefit both companies by ensuring the availability of key technology in Germany.
