Published: Tue, October 23, 2018
Business | By Tara Barton

Fiat sells auto parts unit to Japan's Calsonic for 6.2 bn euros

Fiat sells auto parts unit to Japan's Calsonic for 6.2 bn euros

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.

It said the merged company will rank in the top 10 auto parts suppliers globally with annual sales of 15.2 billion euros (USD 17.6 billion).

"This is a transformational day for both Magneti Marelli and Calsonic Kansei", said chief executive officer Ermanno Ferrari, "creating as it does a global business of exceptional range, reach, expertise, and future prospects". The statement said new entity will be called Magneti Marelli CK Holdings, and would build on the strength of the companies' complementary product lines.

The sale shouldn't come as too much of a surprise, given the late Sergio Marchionne announced Fiat Chrysler was looking for a buyer, or to spin the brand off, while laying out the supplier's future a year ago.

FCA shares were up 3.6 percent at 1358 GMT as investors welcomed the hefty price tag, which will boost FCA's net cash position, raise expectations of a share buyback and pave the way for dividend payments the carmaker promised under its new five-year strategy plan unveiled in June.

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Calsonic has been in talks with FCA for months and made an initial 5.8 billion euro bid, sources have said.

Fiat Chrysler said earlier this year that it planned to hive off its auto parts unit. And now he's done it, selling off the component-supply unit to a leading competitor. Magneti Marelli employes 43,000 people in 19 countries. That's more than double what listed rivals such as Valeo or Continental are worth, according to Refinitiv data.

A takeover of Magneti Marelli had seemed elusive as potential bidders were offering too little or were only interested in some parts of the business.

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

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

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