Schaeffler secretly locked up 36% of Continental using swaps that legally didn't count

Schaeffler, a family-owned ball-bearing Mittelstand champion from Herzogenaurach, wanted Continental — a company three times its size — but knew that openly crossing Germany's 3% disclosure threshold would spike the share price and arm Conti's defenses. The obvious route, buying shares on the market, was exactly what the disclosure regime was built to expose.

Instead, between spring and 23 May 2008 Schaeffler stayed at 2.97% of the shares (just under the threshold), added options over 4.95%, and signed cash-settled total-return swaps with four banks over ~28% of Conti stock. Cash settlement meant no voting rights ever attached, so under the letter of § 22 WpHG nothing had to be reported. BaFin later investigated and, on 21 August 2008, confirmed no disclosure rules had been violated.

On 15 July 2008 Schaeffler revealed its position and a €69.37-per-share offer, catching Continental's board flat-footed. After resistance, Conti agreed on 20 August 2008 to an investment agreement at €75 per share capping Schaeffler at 49.99% for four years. The mechanism worked so well that lawmakers closed it within weeks via the Risikobegrenzungsgesetz — three months before the Porsche–VW squeeze made the playbook infamous.

Cash-settled swaps gave exposure without votes — votes were all the law counted

First large-scale, documented use of cash-settled swaps for a creeping takeover in Germany — months before Porsche/VW.

Exploited a precise textual gap: disclosure law counted votes, not economic exposure.

BaFin's own investigation certified the maneuver was legal, not a violation.

Directly triggered a statutory fix (Risikobegrenzungsgesetz, Aug 2008) — a mechanism that changed the law.

Classic Mittelstand asymmetry: a private family firm out-financed a DAX-listed giant's defenses.

When a rule counts legal rights rather than economic exposure, a derivative that mirrors ownership without title can move control invisibly — legally enough that the law itself had to change.

The financial crisis slashed Conti's value below the €75 offer price, leaving Schaeffler with roughly €10bn of debt and ~90% of Conti shares tendered; it nearly collapsed and was rescued by its banks. Conti CEO Wennemer resigned. By 2009 Schaeffler controlled ~90% of Continental and later took itself public in 2015. The disclosure loophole was closed in Germany and, following the Porsche/VW squeeze, across the EU.