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(Bloomberg) – Magna International Inc. to acquire Veoneer Inc. for $ 3.8 billion in cash, further strengthening its business of providing advanced driver assistance systems to automakers.
The Canadian company’s offer of $ 31.25 per share represents a 57% premium over Veoneer’s closing price on Thursday. The transaction is expected to close by the end of this year, according to a statement.
Veoneer’s shares edged above the buyback price on Friday morning before slashing gains to trade at $ 31.20 at 3:06 p.m. New York. Magna fell 7.1%, its biggest intraday decline in more than a year.
Semi-autonomous features like hands-free driving and crash avoidance technology have become hotly contested battlegrounds as automakers seek to raise prices, top rivals with options that command a premium and give drivers have the right to brag about high technology. In response, global automotive suppliers are increasingly positioning themselves to take advantage of the growth in advanced safety features in passenger cars.
“One of the pillars of Magna’s strategy was to be able to create investments in fast-growing areas that are relevant to the car of the future. ADAS is one of them, ”CEO Swamy Kotagiri said in an interview with Bloomberg Television on Friday. “You have to look at sustainable long-term shareholder value, and that’s what we’re focusing on. “
ADAS, or advanced driver assistance systems, refers to features of cars on the road such as automatic emergency braking or lane keeping assist.
General Motors Co. said this week it is introducing its hands-free driving software to more vehicles and adding new features such as automatic lane change capability. Crosstown rival Ford Motor Co. last October announced plans to offer its hands-free driving technology, dubbed Blue Cruise, on its F-150 pickup, the best-selling vehicle in the United States.
“This is a very good result for VNE shareholders,” said Joseph Spak, analyst at RBC Capital Markets, in a note. The deal gives Veoneer more resources to develop its suite of driver assistance systems and it now has a big customer for its perception of the vehicle and its software platform, Spak wrote.
Veoneer was split from auto safety provider Autoliv Inc. in 2018. Shares lost more than half of their value after the split, as orders fell and the company racked up losses.
Magna investors “will be wrestling with the rationale” for the short-term deal, said Chris McNally, analyst at Evercore ISI, in a memo, citing possible challenges with integrating certain technologies and the recent consumption of Veoneer’s liquidity. On the plus side, Veoneer’s radar, thermal and driver monitoring systems business is “high quality and truly complementary” to Magna’s product offerings.
Magna and Veoneer said the deal was unanimously approved by their respective boards. Citigroup Inc. served as financial advisor and Sidley Austin LLP provided legal advice to Magna. Rothschild & Co. and Morgan Stanley advised Veoneer with Skadden, Arps, Slate, Meagher & Flom LLP.
(Updates with CEO quote in fifth paragraph)
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