The family-owned car parts and ball bearings maker said it would place up to 166m new and existing non-voting shares with institutional investors via a private placement. After the transaction the company said it would have a free float of about 25 per cent.

Schaeffler did not say how much it planned to raise but estimates suggest it expects to generate about €2.5bn in proceeds which would make it one of the largest listings in Germany this year.

“The planned listing is a strategic step to further reduce our indebtedness and to improve the capital structure,” Klaus Rosenfeld, chief executive, said in a statement. “We thus obtain further financial flexibility to seize additional growth opportunities.”

The bookbuilding process is scheduled to start at the end of September, with the first day of trading anticipated in Frankfurt in October.

The prospect of a public listing marks the resolution of a seven-year struggle to repair the damage to Schaeffler’s balance sheet caused by its debt-financed takeover of Continental in 2008.

When US bank Lehman Brothers collapsed many more Conti shareholders accepted Schaeffler’s offer than it had anticipated. Schaeffler was left holding 90 per cent of Conti’s stock and together the two companies had a combined €22bn in debt.

Schaeffler has since cut net debt to €6.2bn and lowered its stake in Conti to 46 per cent. The company, which has 84,000 employees, generated €12.1bn in revenues last year.

Investors who buy shares in a listed Schaeffler will, however, own shares only in the Schaeffler operating company; the Conti stake is held at the family holding company level.

Schaeffler’s bearings support the US space shuttle and the Airbus A380 superjumbo, and a typical car contains about 60 Schaeffler friction-reducing components. It ranks second in Germany for patent applications behind Bosch

In seeking to value Schaeffler, investor may look at competitors such as SKF, the Swedish ballbearings maker, as well as Continental, which trade on price-earnings multiples of 14 and 15 respectively. In view of Schaeffler’s €654m net income last year, the comparison suggests Schaeffler might raise about €2.5bn in the transaction.

Schaeffler is owned by Maria-Elisabeth Schaeffler-Thumann, who holds 20 per cent, and her son Georg, 80 per cent. In March, Forbes magazine estimates Georg Schaeffler’s fortune at $26.3bn, which would make him Germany’s richest person.

The company plans to retain 100 per cent of the voting shares following the listing and Ms Schaeffler-Thumann assured customers and employees in a statement that Schaeffler would “remain a family business in the future”.

Innovation and lean production processes have made Schaeffler highly profitable — in 2014 it reported a 12.6 per cent operating margin. However, its business started to slow over the summer months, due in part to weaker Chinese demand for cars.

Stripping out the impact of currency swings, Schaeffler is targeting a 4-5 per cent increase in revenues in 2015 and an operating profit margin of about 12.2 per cent.

Schaeffler plans to pay a dividend of 25-35 per cent of net income to shareholders, starting this year.