Fiat Chrysler Automobiles has entered into a definitive agreement to sell its automotive components business Magneti Marelli to CK Holdings, a holding company of Calsonic Kansei Corporation, a leading Japanese automotive component supplier.

Following the closing of the transaction, CK Holdings will be renamed as Magneti Marelli CK Holdings. The combined businesses of Calsonic Kansei and Magneti Marelli will become the world’s seventh largest global independent automotive components supplier based on total revenues.

The agreement represents a transaction value of 6.2 billion euros (Rs 52,277 crore). The transaction, expected to close in the first half of 2019, will combine two successful businesses to create one of the leading global independent automotive components suppliers, with combined revenues of 15.2 billion euros (Rs 128,163 crore). The new entity will operate out of nearly 200 facilities and R&D centres across Europe, Japan, the Americas, and Asia Pacific.

Magneti Marelli, which was founded in 1919 and is headquartered in Corbetta, Milan, specialises in lighting, powertrains, electronics, exhausts, suspensions, shock absorbers, and motorsports. The company has been a subsidiary of FCA and its predecessor companies since 1967. Total revenues for 2017 were 8.2 billion euros.

Calsonic Kansei manufactures a comprehensive product line of auto parts specialising in thermal products, exhaust systems, interiors and electronics. It is headquartered in Saitama, Japan and has recently celebrated its 80th anniversary. It recorded consolidated revenues of 7.7 billion euros for fiscal year 2017, which ended March 2018.

FCA has also agreed to a multi-year ‘Supply Agreement’ that is claimed to further strengthen a mutually beneficial relationship for both Magneti Marelli and FCA’s expanding model range and which will sustain Magneti Marelli's Italian business operations, positioning it strongly for continued growth and success in the future. The combined company will be led by Beda Bolzenius, currently CEO of Calsonic Kansei, based in Japan. Ermanno Ferrari, CEO of Magneti Marelli, will join the Magneti Marelli CK Holdings board.

Commenting on the transaction, Mike Manley, CEO of FCA, said, “Having carefully examined a range of options to enable Magneti Marelli to express its full potential in the next phase of its development, this combination with Calsonic Kansei has emerged as an ideal opportunity to accelerate Magneti Marelli’s future growth for the benefit of its customers and its outstanding people. The combined business will continue to be among FCA’s most important business partners and we would like to see that relationship grow even further in the future. The transaction also recognises the full strategic value of Magneti Marelli and is another important step in our relentless focus on value creation.”

Beda Bolzenius, CEO of Calsonic Kansei, said, “Our industry has gone through fierce change in recent years and the phase to come will be even more dynamic. It is exciting to form a strong platform for Calsonic Kansei and Magneti Marelli to work together and create a competitive automotive supplier which is extremely well placed among the global Top Ten. Together, we will benefit from complementary geographic footprints and product lines, while our respective customers will benefit from an increased investment in people, processes and innovative new products.”

Ermanno Ferrari, CEO of Magneti Marelli, said, “This is a transformational day for both Magneti Marelli and Calsonic Kansei, creating as it does a global business of exceptional range, reach, expertise and future prospects. This is a moment of great opportunity for all our people to be part of a secure, growing and independent company of considerable scale that can look to the future with energy, ambition and confidence."