French automotive supplier Faurecia has acquired the majority 60 percent equity stake in lighting and electronics specialist Hella for 3.4 billion euros in cash. It plans to acquire the remaining equity at an offer price of 60 euros a share, which makes the transaction an estimated total enterprise value of 6.7 billion euros (Rs 55,388 crore) for 100% of Hella.
By combining their activities, the two companies will become the seventh largest global automotive supplier (in the top 5 in Europe and in the top 10 on the American continent and in Asia). Both Faurecia and Hella has a strong presence in India.
By combining their respective strengths, Faurecia and Hella, who are both global market leaders, they aim to further expand their market position, particularly in key growth areas such as electric mobility, automated driving and vehicle interior design. The combined entity will also further strengthen their position across customers and regions.
The Group will become a major player in the fields of electronics and software, with a turnover of 3.7 billion euros (Rs 30,588 crore) and around 3,000 software engineers. It will reach critical mass and occupy leading positions in all of its activities.
Patrick Koller, CEO of Faurecia, said, “With particular attention paid to sustained cash generation and corporate deleveraging. I am convinced that this combination of our companies will create lasting value for the customers, employees and shareholders of Faurecia and Hella."
Dr Rolf Breidenbach, Managing Director of Hella, said: “Faurecia and Hella complement each other perfectly, especially in terms of product portfolio and market coverage. In addition, both partners place great importance on customer focus, operational excellence and technological leadership. It is therefore logical that we join forces to drive the future of mobility together. With Faurecia by our side, we will have even more opportunity."
Key takeaways of the Faurecia-Hella combine
Faurecia says it aims to enhance and develop the strong technological dimension of Hella's activities. Faurecia will accelerate Hella's multi-pillar business strategy by focusing not only on OEM automotive equipment (Lighting and Electronics), but also on other market segments (Aftermarket, Services and Special Applications).
Together, Faurecia and Hella aim to develop an offer for strong and targeted Electric Mobility (electric vehicles with battery and fuel cell). The Combined Group will develop a complete offer for EVs (hybrid electric vehicles, plug-in hybrids, battery electric and fuel cell electric vehicles). The Group will rely on Hella's portfolio in energy management, on sensors and actuators linked to battery-powered electric vehicles, as well as on Faurecia's offer in the field of hydrogen system solutions (FCEV) and Faurecia's hybrid systems. Battery management systems, DCDC converters, on-board charging systems supplied by Hella as well as battery pack systems, hydrogen storage systems and fuel cell systems supplied by Faurecia are examples of the offer of combined products.
Also, the goal is to reduce the exposure to sales of internal combustion engine vehicles of 25% in 2020 for Faurecia to around 10% in 2025.
The two suppliers aim to become a major player in dedicated electronics and software solutions to accelerate the development of ADAS and autonomous driving. Here, the combination of Faurecia Clarion Electronics with Hella Electronics and Software will create a new benchmark global player in the context of the future ADAS convergence at high and low speed.
Radars, electric power steering (including fault management systems), digital mirrors, 360deg views and automated parking solutions are just a few examples of the combined product and system offering.
With a combined turnover of 3.7 billion euros in the electronics and software sectors, the new Group will operate 24 production sites and develop innovation in 21 R&D centres. The overarching goal, taking into account an already significantly filled order book, is to bring turnover to around 7 billion euros in 2025.
The structure of the transaction will allow Faurecia to implement, from day one, the execution of a significant synergy and cost optimisation plan, generating more than 200 million euros of additional EBITDA on an annual, with an impact on the income statement of 80% in 2024. Between 300 and 400 million euros in revenue from revenue synergies are expected by 2025, as well as cash flow optimisation of around 200 million euros per year on average from 2022 to 2025.
Reinforce Faurecia's Cockpit of the Future strategy
The leading positions of Faurecia in the Seating and Interior sector (including SAS), combined with the leading position of Hella in the field of interior lighting, as well as the respective positions of the two companies in electronics, will significantly strengthen our strategy in the area of the Cockpit of the Future.
Hella's capabilities in terms of HMI (Human Machine Interface) solutions dedicated to the passenger compartment, its portfolio of electronic solutions dedicated to the bodywork (access, comfort, seat), as well as its sensors and actuators will help create value through to new customer experiences.