Fiat likely to sell auto parts unit Magneti Marelli to KKR’s Calsonic

Fiat Chrysler Automobiles NV has agreed to sell its high-tech car-parts unit, Magneti Marelli, to KKR & Co.’s Calsonic Kansei in the first big deal for the Italian-American carmaker under new Chief Executive Officer Mike Manley, according to people familiar with the matter.

An announcement is scheduled for as early as Monday, said the people, who asked not to be identified because discussions are private. The transaction value could be as much as 6.2 billion euros ($7.1 billion), two of the people said, and would end months of negotiations over terms. Representatives for Fiat and KKR declined to comment.

A merger of Magneti Marelli and Calsonic Kansei would create an auto-parts maker with more than $17 billion in annual revenue and about 65,000 workers from Tokyo to Milan. The sale is one of the first major milestones for Manley, who took over Fiat days before the death of his predecessor Sergio Marchionne in July. It’s also the first M&A transaction overseen by Chairman John Elkann since his so-called deal “maestro” passed away.

Marchionne, who had initially favored separating the business by distributing shares to investors, had said Fiat was open to changing its mind for a “big check.” Fiat opted for a sale of Magneti Marelli instead of listing on the Milan stock exchange after market conditions deteriorated amid global trade tensions and political uncertainty in Italy, as well as profit warnings from automakers and suppliers.

Deteriorating Conditions

Daimler AG issued its second profit warning in four months on Friday and automotive supplier Continental AG also cut its outlook in August. Volvo Cars in September delayed plans for a share sale, saying the timing is “not optimal,” and Aston Martin’s shares have slumped since its initial public offering.

Fiat could now consider rewarding shareholders with the Marelli sale. The unit could provide Fiat with more than $2 billion in dividends, according to Joel Levington, a senior credit analyst at Bloomberg Intelligence.

Japanese companies have announced more than $200 billion of acquisitions this year, a 60 percent increase from the same period in 2017, according to data compiled by Bloomberg. The deal volume has already reached the highest annual tally in more than a decade, the data show.

Before pursuing talks with KKR, Fiat fielded interest from other potential buyers, including Apollo Global Management, Bain Capital and an unnamed Asian parts supplier, people familiar with the matter said in August.

Bloomberg

The post Fiat likely to sell auto parts unit Magneti Marelli to KKR’s Calsonic appeared first on DealStreetAsia.

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