Canadian auto parts maker Magna to buy Germany's Getrag for $1.9 billion

Thu Jul 16, 2015 3:07pm EDT
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By Euan Rocha and Allison Martell

TORONTO/FRANKFURT (Reuters) - Canadian automotive parts maker Magna International Inc (MG.TO: Quote) said on Thursday it would buy privately-owned German car parts maker Getrag for 1.75 billion euros ($1.9 billion), in a bid to expand its automotive transmission systems business.

The move is also part of the plan by the world's No.3 autos supplier to win market leadership in certain key vehicle parts. Earlier this year, Magna sold most of its automotive interiors unit to Spain's Grupo Antolin for $525 million.

Magna Chief Executive Don Walker said Magna had identified transmissions as a strategic priority, in part because improved powertrains will be crucial to meeting fuel economy targets set by governments around the world.

"Transmissions are highly engineered products with long life cycles, which makes them difficult to commoditize," he said on a conference call.

The deal values Getrag at 8.8 times its expected core earnings, a significant premium to European car parts makers, which trade at an average multiple of 7, according to Reuters data.

Walker noted Untergruppenbach-based Getrag is a technology leader in the product area and indicated its joint venture relationships, especially those in China were an attraction.

Getrag is a joint-venture partner of Ford Motor Co (F.N: Quote) and counts BMW (BMWG.DE: Quote), Daimler (DAIGn.DE: Quote), Renault SA (RENA.PA: Quote) and Volvo among its clients. It also has significant tie-ups with Chinese auto makers Jiangling Motors Corp (000550.SZ: Quote) and Dongfeng Motor Group (0489.HK: Quote).

Getrag and Magna had been in on-and-off talks over a combination for 8-9 years and talks intensified after a 2012 review of how Getrag wanted to finance itself going forward, Getrag CEO Mihir Kotecha said on a conference call, adding he expected the deal to close by year-end.   Continued...

Magna CEO Don Walker speaks during the company's Annual Shareholder Meeting in Toronto, May 8, 2014. REUTERS/Aaron Harris