Selling off Magneti Marelli could accelerate the development of EVs and AVs FCA CEO considers critical to FCA's success.
KKR & Co., one of the leading specialists in leveraged buyouts that turn public companies private, is in talks to acquire the auto parts business of Magneti Marelli from Fiat Chrysler Automobiles N.V., according to a number of published reports.
FCA announced last spring it planned to put Magneti Marelli up for sale after a lengthy study initiated by the late CEO Sergio Marchionne.
The appeal of selling off Magneti Marelli, which has been part of the Fiat automotive empire for almost 100 years, is that it would provide an infusion of cash that could help shore up the company’s balance sheet at a time when it is looking for new funds to finance projects ranging from the automaker’s expansion in China to financing the development of electric and autonomous vehicles.
Mike Manley, FCA’s new CEO, has said electrification and AVs are critical to the company future. Magneti has been valued tentatively at between $3.7 billion and as much as $6.5 billion or more by some analysts, who are also suggesting the final sale price could reach or exceed the top end of that range if a deal is completed.
Former FCA CEO Sergio Marchionne flirted with spinning off Magneti Marelli for nearly two years.
(Fiat Chrysler spinning off Magneti Marelli parts business. Click Here for the story.)
Initially, according to statements from Marchionne in April, FCA planned to spin off Marelli, which supplies electronics, automotive lighting and powertrain components and has about 43,000 employees. It also has been integrated in the FCA’s replacement parts business operated by Mopar.
The move was part of a plan designed to “purify” the Italian-American automaker’s focus on automotive manufacturing. It also included earlier divestitures of FCA’s truck and tractor operations, CNH Industrial, and supercar brand Ferrari.
(Click Here for more about FCA’s ever-changing plans for Magneti Marelli.)
Boxes of Magneti Marelli parts.
The Wall Street Journal, citing unnamed sources, said that if successful with the acquisition of the assets from FCA, KKR is expected to merge Magneti Marelli with another automotive supplier, Japan’s Calsonic Kansei Corp.
Nissan sold KKR a controlling interest in Calsonic last year. The merger of the Italian and Japanese component makers would create an auto parts giant that could cut costs by eliminating overlapping operations, according to the Journal.
(To see more about FCA’s plans to ban Mahindra’s Jeep look-alike, Click Here.)
The Journal noted that KKR paid about $4.5 billion for Calsonic.