France’s Faurecia makes €6.7bn bid for Hella of Germany
Auto equipment makers consolidate as industry switches to electric vehicles
French auto equipment maker Faurecia has agreed to buy the Hueck family’s controlling stake in Hella of Germany and is bidding for the remaining shares in a deal valued in total at €6.7bn, the two companies said at the weekend.
The bid is the latest example of consolidation in an industry switching its focus from cars powered by internal combustion engines to electric vehicles with different technological requirements and supply chains.
“Together, we’ll be ideally placed to respond to the strategic developments that are transforming our industry,” Patrick Koller, Faurecia chief executive, said in a statement, calling the combination of the two companies “a unique opportunity” to create a world leader in automotive technologies.
Faurecia said it had agreed with Hella’s founding family and the company to launch a debt-financed public offer at €60 a share, plus a €0.96 dividend to be proposed in September — a 33 per cent premium over the undisturbed price before Faurecia and other suitors began circling the German group — and to buy the family’s 60 per cent stake at the same price for €3.4bn in cash and shares.
Hella shares closed on Friday above the offer price, at €63.18.
The Hueck family will end up with a 9 per cent stake in Faurecia, with an 18-month lock-up. Jürgen Behrend, who chairs the family holding, said the deal secured the company’s future before the expiration of the existing “family pool” agreement.
“This will allow the further improvement of the business’s strategic positioning, in the interests of Hella and its 36,000 employees,” he said. Paris-listed Faurecia has 114,000 employees in 35 countries.
The enlarged Faurecia would have a pro forma annual turnover of €23bn this year, which was forecast to rise to €33bn by 2025, and would become the world’s seventh-largest auto equipment supplier, the companies said, focusing on electric and hydrogen-powered vehicles, advanced systems for assisting drivers and for autonomous vehicles.
Faurecia said the synergies and cost benefits from the takeover would generate more than €200m in earnings before interest, tax, depreciation and amortisation annually, with turnover boosted by €300m-€400m by 2025 “capitalising on Faurecia’s strong presence in China, Japan and the Americas to sell the Hella brand, and Hella’s positions with German vehicle makers benefiting Faurecia’s market share”.
Hella, well known in Europe for its signature branded fog lights, has a portfolio of products in energy management, sensors and actuators for electric motors, and three of the six business units of the combined group will be based in the German town of Lippstadt.
Faurecia, advised by Lazard, said the acquisition would be financed with a €5.5bn bridge facility, mostly refinanced through bonds and bank loans except for the bridge-to-equity component of €800m, which will be refinanced through a rights issue.