Tue, Oct 23, 2018 - Page 10 News List

Fiat to sell parts unit to KKR’s Calsonic Kansei

Bloomberg

Fiat Chrysler Automobiles NV agreed to sell its high-tech auto-parts unit, Magneti Marelli, to KKR & Co’s Calsonic Kansei in a 6.2 billion euro (US$7.15 billion) transaction, marking the first major deal for the Italian-American automaker under new chief executive officer Mike Manley.

The new merged entity would be called Magneti Marelli CK Holdings, the companies said in a statement yesterday.

Fiat Chrysler would enter into a multiyear supply agreement with its former unit that would maintain its employment levels and Marelli’s presence in Italy.

“The transaction recognizes the full strategic value of Magneti Marelli and is another important step in our relentless focus on value creation,” Manley said in the statement.

The deal creates an auto-parts maker with more than US$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 Chrysler days before the death of his predecessor Sergio Marchionne in July. It is also the first merger and acquisitions transaction overseen by chairman John Elkann since his so-called “deal maestro” passed away.

Shares in Fiat Chrysler rose 5.2 percent to 14.14 euros in Milan trading yesterday after a delayed opening.

The price for the unit is more than 1 billion euros higher than analysts’ average valuation for the business, Mediobanca said in a note.

Through Sunday, shares in the automaker had lost about 20 percent since Marchionne’s death as Italian stocks entered a bear market after the country’s new populist government failed to win investors’ confidence.

With the sale, Manley and Elkann are continuing Marchionne’s strategy of extracting value for shareholders by separating businesses from the auto division.

Under Marchionne, Fiat Chrysler’s value had risen more than 10-fold, helped by the spinoffs of supercar maker Ferrari NV and truck and tractor division CNH Industrial NV.

Simplifying the company allows Manley to focus on building and selling cars, and makes Fiat Chrysler less complex in the case of any eventual merger talks.

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