The numerous reports have panned out, with Canadian automotive parts supplier Magna International announcing it would acquire privately-owned German transmission specialist Getrag for 1.75 billion euros ($1.9 billion).
The deal comes as the Canadian manufacturer seeks to expand its automotive transmission systems division and is also an integral part of the world’s third largest supplier to become market leader in certain business sectors. This year Magna also sold off the majority of its interiors unit to Spain’s Grupo Antolin for $525 million. “Transmissions are highly engineered products with long life cycles, which makes them difficult to commoditise,” commented during a conference call Magna chief executive officer Don Walker. He added the supplier sees transmissions as a strategic priority, partially since better powertrains would be key in having automakers comply with stricter fuel economy and emissions standards imposed by governments across the planet.
The deal has placed an 8.8 times higher value on Getrag’s envisioned core earnings, a major premium for a European car parts manufacturer, which are usually traded at an average multiple of 7, according to Reuters. Untergruppenbach-based Getrag is among the technology leaders in its product sector and had strong joint venture businesses, especially in China. Among its partners Walker noted Ford and said BMW, Daimler, Renault and Volvo were some of the major clients. Its main Chinese implications concerned Jiangling Motors Corp and Dongfeng Motor Group. Getrag CEO Mihir Kotecha added Magna and his company had been courting each other on and off for the past 8-9 years and the negotiations took an upwards momentum after 2012.