FCA may sell auto parts maker Magneti Marelli

Article by Andrew Christian, on July 22, 2015

Fiat Chrysler Automobiles is looking into proposals from several parties who have expressed interest to buy auto parts maker Magneti Marelli, according to insiders. Magneti Marelli supplies all the major automakers in Europe, the Americas and Asia. When interviewed by Reuters, three sources said that at least two U.S. private equity funds are hoping to partner with industry players and submit joint proposals.

Last June, FCA had denied a bid by a group that included a U.S. buyout fund and that had valued the business at less than $2.7 billion bid (2.5 billion euros) because it didn’t want to sell for lower than 3 billion euros.

FCA spokesman Gualberto Ranieri said that the company hasn’t put Magneti Marelli up for sale. The insiders said further that FCA, which is currently in a lot of debt, may sell the unit in parts or as a whole.

The sources said that so far, there has been no decision yet on how it will be handled. Magneti Marelli has long been a target for a takeover. FCA has always said that it doesn’t want to sell but according to sources, the company had recently informed those interested that it could reconsider its stand.

However, FCA is currently very busy with an IPO planned for Ferrari in mid-October so the matter with Magneti Marelli will have to be decided after that.

The sources said that for several months, the U.S. buyout funds have been working on the bids and that Marchionne is expected to respond to these “sooner rather than later.”

If FCA sells this unit (which has a workforce of over 38,000 people and is found in 19 countries), it may help pay off a portion of its debt as well as support a 48 billion euro investment plan. This plan has a chance as Marchionne’s wish for a merger with General Motors has not been entertained.

On the Automotive News list of the 100 largest suppliers, Magneti Marelli is ranked as No. 30 with its global direct sales to automakers totalling $8 billion last year. The list indicates that Europe comprises 2/3 of its business.

Last year, it reported an operating profit of 204 million euros ($221 million). It manufactures parts for lighting, engines, electronics, suspension and exhausts. The sources said that it’s likely that bidders aim to get total control of Magneti Marelli and later split it up depending on their expertise.

A source said that everyone will want to get a “fair share” of the company. Several big buyout funds, primarily those based in the U.S., are interested in Magneti Marelli's lighting unit, which may be turned into a standalone company.

Topics: fiat, chrysler

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