Fiat Chrysler sells Magneti Marelli for $7.1B

Lloyd Doyle
October 23, 2018

Fiat Chrysler's (FCA) bottom line is now a little fatter.

Fiat Chrysler Automobiles N.V. ("FCA") (NYSE: FCAU/MTA: FCA) announces that it has entered into a definitive agreement (the "Transaction") to sell its automotive components business Magneti Marelli S.p.A. ("Magneti Marelli") to CK Holdings Co., Ltd. ("CK Holdings"), a holding company of Calsonic Kansei Corporation ("Calsonic Kansei"), a leading Japanese automotive component supplier.

The first big deal by FCA's newly-appointed chief executive Mike Manley, who took over in July after the sudden death of long-time boss Sergio Marchionne, creates a company with revenue of 15.2 billion euros ($17.5 billion), the companies said. The deal, worth 6.2 billion euros (RM29.57 billion), will create Magneti Marelli CK Holdings, the seventh-largest independent vehicle parts supplier in the world based on total revenues. Selling Magneti Marelli boosts the net cash position of the Italo-American automotive group, which could translate to a buyback of shares at some point in the future. Manley has said he plans to execute the late CEO's latest five-year plan, which called for a Magneti Marelli spin-off or sale, and greater investment into hybrids and electrification. Calsonic initially made a bid of $6.7 billion, according to the report.

The Transaction represents a unique opportunity to combine two successful businesses to create one of the leading global independent automotive components suppliers, with combined revenues of Euro 15.2 billion (JPY 1,975 billion).

Magneti Marelli, which was founded in 1919, has been a subsidiary of FCA and its predecessor companies since 1967. Following the closing of the Transaction, CK Holdings will be renamed as Magneti Marelli CK Holdings*.

There will be a multi-year supply agreement with Fiat Chrysler. That's more than double what listed rivals such as Valeo or Continental are worth, according to Refinitiv data.

FCA also preferred the Calsonic offer to a pure private equity bidder because it limits the risk of the unit being broken up, sources have said.

The deal should be closed in the first half of 2019, it added.

Specialized in lighting, powertrain, and electronics, Magneti Marelli is responsible for Fiat Chrysler shares shooting up on the stock exchange.

Other reports by Iphone Fresh

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