Privately held INA Holding Schaeffler KG goes public with a surprise € 673 million takeover bid for FAG Kugelfischer Georg Schaefer AG, an offer which it disclosed to FAG management only the day before. If successful, INA will become the world's second-largest bearing manufacturer behind Sweden's SKF.

Calling INA's offer of € 11 per share "inadequate", FAG management responded by branding INA's takeover bid as "hostile" and urged shareholders not to tender their shares.

On September 13, FAG Chairman Uwe Loos issued this "Letter to our Shareholders".

When shares in FAG began trading again after being halted due to the takeover bid, they immediately rocketed to a new 52-week high. Starting from around € 6 per share, they went to almost 11, INA's offering price.

INA aggressively acquired almost 6% of FAG's outstanding shares on the first day of the offer. Over the first two days of trading, INA now claims to have purchased on the open market more than 10% of FAG's outstanding shares. FAG's response is now to pursue anti-takeover moves and/or alliances with other bearing companies.

FAG Chairman Uwe Loos' rhetoric against the INA hostile takeover bid has escalated even further. Speaking to employees about their possible future under INA, he said, "management will do everything to stop the FAG Kugelfischer sellout." He also called INA's suggestion that there would be no layoffs if FAG was acquired, "surreal" and "out of touch with reality."

Asking shareholders, "please don't sell now," FAG Chairman Uwe Loos said the company is preparing to respond to INA's hostile takeover bid in a way that would be worth their wait. But FAG shareholders aren't waiting - INA has managed to acquire over 20% of FAG's outstanding shares in the week since announcing their plan.

In another surprising development, FAG's long-time "house bank", Dresdner Bank, suddenly abandoned their client and has gone over to help INA acquire FAG shares. Dresdner Bank joins a consortium, led by powerhouse Deutsche Bank, supporting the INA bid.

FAG CEO Uwe Loos now downplays the idea that the FAG-NTN venture would turn NTN into FAG's "white knight" against INA. Instead, Loos now suggests, "one could also imagine an American partner." In that case, Timken is the only viable possibility.

Although FAG senior management continues to aggressively fight the INA takeover bid, its rank-and-file employees are preparing for the takeover as inevitable.

FAG revealed it is evaluating two alternatives for shareholders which would unlock more value and entice them not to sell. INA and some analysts responded by pointing out it is taking FAG far too long to round up other interested investors, if they exist.

FAG is accusing Dresdner Bank of providing sensitive inside information about the company to INA; information which is being used to help INA's hostile takeover bid.

Under Article 18 of the German Takeover Code, FAG must respond officially to INA's takeover bid. The company has issued that formal response, urging shareholders not to sell their shares but outlining none of the expected partnerships or alternatives for the future other than business-as-usual.

INA announced that it now holds a controlling minority share in FAG, having acquired over 25% of the company's outstanding shares. This stake gives INA the power to block any decision by FAG's supervisory board, and very likely marks the end of FAG's ability to wage any anti-takeover battle.

The takeover war is now being waged in the German media, by FAG and INA alike, as much as it is in the boardrooms. FAG is reported to be aggressively negotiating with NTN and another financial source not in the bearings industry. Their mission is to assemble the backing for a counteroffer, said to be in the € 13 per share range, and sweetened by a one-time cash dividend.

FAG has reportedly lost its London-based financial backer for an INA counteroffer. The potential for FAG to assemble any alternative bid is now unclear, as INA's offer for FAG's shares runs only through the end of next week.

Institutional investors and hedge funds are apparently doing what FAG management could not - stall INA's takeover bid. With speculative investors buying big chunks of FAG shares on the open market, INA's purchasing has slowed. The company may be forced to change its tactics or increase the offering price in order to gain the 75% ownership it wants.

FAG management, perhaps sensing the time has come and gone for any chance to block INA's takeover bid, is reportedly in talks with INA to sweeten the offering price. Reportedly, if INA is willing to raise the offer from € 11 per share to € 12.5 per share, FAG management will support the transaction and the fight will be over.

FAG and INA have reached an agreement for the takeover, and FAG will support it to shareholders. The cornerstone is a € 12 per share offer, but FAG will also remain a separate division, in Schweinfurt, with management contracts intact. Some German business analysts said INA is simply allowing FAG management to "save face". Assuming European Union regulators approve the merger at their meeting this Friday, the fight is over and Germany will be home to the world's second-largest bearing manufacturer.

FAG and INA waged an extensive and expensive media war over the takeover bid. The impact on FAG's financial results is reportedly going to be large. Separately, INA will be cleaning house in FAG's management ranks.

Individual FAG shareholders are the latest snag in the deal. Equally upset with FAG management negotiating sweetheart deals for themselves and with an INA offer still considered far too low, many are simply not offering their shares. Since individuals own the majority of FAG's outstanding shares, the new wrinkle is a serious problem. INA has indicated it must acquire at least 75% of FAG shares in order to complete the takeover.

The U.S. Federal Trade Commission has issued a "second request" for information from both parties in the acquisition. Although not expected to interfere with the transaction, the FTC's approval process could potentially drag on beyond INA's October 29 target date for completion.

Inside reports now put INA's ownership at between 75% and 90% of FAG's outstanding shares. Other than a lingering U.S. Federal Trade Commission hearing, the acquisition appears to be a certainty.

INA officially revealed it was able to acquire over 80% of FAG's outstanding shares during the offer period.

INA has finally released an official accounting of the FAG shares it acquired during the tender offer period. At over 87%, the response was better even than most acquisition supporters expected.

With INA now holding so many FAG shares, the Frankfurt Stock Exchange announced FAG will be delisted by the end of 2001.

Workers at FAG and INA are represented by Germany's largest trade union, IG Metall. The union has now negotiated new 3-year no-layoff contracts with both companies. The contracts go into place when INA's takeover of FAG is complete.

If INA is successful in taking over FAG, India's stock market regulations require it to make a tender offer for at least 20% of the outstanding shares of FAG Bearings India Ltd., the 51%-owned subsidiary of FAG Germany. Shares of FAG India have been up sharply on that speculation.

FAG CEO Uwe Loos is now on his way out by the end of the year. INA CEO Juergen Geissinger is taking over all control of the combined company.

The U.S. Federal Trade Commission (FTC) approved INA's takeover of FAG, but with several important provisions. The FTC claimed jurisdiction in the merger, along with the European Union Competition Commission, because both INA and FAG have operations in the United States. In its investigation, the FTC determined that, if INA acquires FAG as it stands, INA will become a monopoly in the world cartridge ball screw support bearings (CBSSB; used in machine tools) business. INA and FAG are the world's only manufacturers of CBSSBs. Thus, the acquisition violates both Section 5 of the FTC Act (15 USC § 45) and Section 7 of the Clayton Act (15 USC § 18). It ruled INA must divest FAG's CBSSB business in its entirety to SKF within 20 days after it begins the FAG acquisition. The FTC also determined that FAG's relationship with NTN must be watched for possible market share abuse.

How you can comment to the U.S. Federal Trade Commission regarding its handling of the takeover of FAG by INA.

Now-former FAG CEO Uwe Loos has joined Dekra, the German automotive test and inspection company, as CEO.

A new German securities law will force FAG's few holdout shareholders to sell their shares to INA.

FAG reports fiscal 2001 earnings were down sharply, due to the expense of fighting off the hostile INA bid. Also, on June 6 at FAG's annual shareholder meeting, INA will present a domination agreement (already ratified by FAG's supervisory board) and a final buyout offer for all FAG shareholder holdouts. The final offer is € 12 ($10.55) per share; holdouts who still refuse even that offer will instead then begin receiving yearly dividends fixed at € 0.79 ($0.69) per share.

INA's integration of FAG has begun; meanwhile, FAG reports first quarter sales are up 1.7%.

INA has petitioned India for permission not to acquire FAG Bearings India, a publicly-traded subsidiary of FAG Germany. Often, when a parent company acquisition is completed, it is treated as a direct takeover of the Indian subsidiary under India's equity market regulations. In that situation, INA would have a period of time to acquire the Indian subsidiary. INA, however, has filed to treat the FAG acquisition as an "independent takeover" - freeing it from any obligation to acquire FAG Bearings India.

INA is investing $20 million into at least two joint ventures with Russia's European Bearing Corp., involving production of large bearings and railroad bearings. Bearings manufactured under this agreement will most likely carry the FAG trademark.

FAG management was obliged to disclose it will acquire French aerospace and precision bearing specialist SNFA S.A. In large part, it had to be disclosed as a means of justifying the share price INA is paying for FAG. INA's €12 per share includes an estimated €1 per share to reflect the successful acquisition of SNFA.

FAG reports first half 2002 earnings were off sharply on near-flat sales. Meanwhile, INA has decided to use a new German securities law to force the minority holdout shareholders to sell.

The French Competition Council charged SKF, INA, FAG and SNR with price fixing and collusion, fining them €19 million (USD $18.7 million).

Klaus G. Lederer, the controversial Chairman of FAG's Supervisory Board, resigned. He will be replaced by Hans Rolf Koerfer, who becomes the third Chairman of FAG's Supervisory Board in under a year. Mr. Lederer was appointed in December 2001 to replace Kajo Neukirchen, who resigned shortly after INA Holding Schaeffler KG successfully forced its acquisition of FAG.

In an unexpected reversal for INA, Indian authorities ruled it must also acquire FAG Bearings India Ltd., 51% owned by FAG Germany. Since INA's takeover of FAG Germany was launched on September 10, 2001, INA had until January 9, 2002 to buy 20% more of FAG India on the open market -- which it did not do. The SEBI not only rejected INA's exemption application, but gave the company only 45 days to launch an offer for an additional 20% of FAG India, priced at 100% of the September 10, 2001 closing price, plus 10% interest calculated from January 9, 2002.

A court-ordered settlement puts the finishing touches on the saga. FAG's dissident holdout shareholders must tender their shares to INA for € 12 per share plus 15%, or € 1.80, for a total of € 13.80.

FAG's board agrees to end the artificial autonomy they negotiated, still legally separating INA and FAG. By 2006, INA and FAG will formally, legally and operationally merge all operations worldwide, creating a new entity, Schaeffler KG, within Schaeffler Group.