Rieter to split, seen helping fund growth

Reuters (Zurich) - Car parts and machinery maker Rieter (RIEN.S) said it would ask for shareholder approval to split its automotive and textiles units into distinct companies.

Credit Suisse (CSGN.VX) (CS.N) said the move would allow each unit -- the textiles unit will continue as Rieter, and the automotive unit will be called Autoneum -- to raise capital singly to make investments and expand their footprint.

"The purpose of the demerger is to give the company its own access to the capital markets to fund its future growth and improve its strategic flexibility," said Marco Illy, Credit Suisse head of investment banking, Switzerland, in an interview.

Rieter announced the split on Tuesday, when it reported a net profit in 2010 after two consecutive years of losses, with overall sales up 32 percent and a 64 percent jump in orders.

Credit Suisse and UBS (UBSN.VX) (UBS.N) advised on the demerger. For Autoneum, which makes floor carpeting and acoustic systems used in the interiors of cars and trucks, Credit Suisse led the financing syndicate, which included UBS, Raiffeisen and ZKB.

"This is the first demerger in Switzerland, since 2009. Market conditions are much more conducive for such transaction structures," said Illy.

Shares pulled back from a three-year high of 403 Swiss francs hit in early trading as analysts questioned whether the share price reflected the sum of the parts of the company.

"Our previous sum of the parts valuation indicated an economic value for the Rieter Group of 1,428 million francs and therefore would offer a certain downside to current valuation," said Vontobel analyst Fabian Haecki in a research note.

Shares were 1.7 percent higher at 380 francs at 1445 GMT, outperforming an almost unchanged Swiss Performance Index .SSHI, after closing 7.5 percent higher on Monday.

Illy said institutional investors like market leaders in particular sectors, which could favour Autoneum, which will list on the SIX Swiss exchange in mid-May.

"There is a preference among auto investors to invest in focused players such as Autoneum, even more so in subsectors like acoustic and thermal management with a reduced number of competitors," he said

"The thermal management and acoustics supply industry is expected to grow faster than the car market on the back of attractive fundamentals, such as the trend towards noise- and weight reduction," he said.