While the auto industry consolidation might not go according to FCA CEO’s Marchionne plans when it comes to automakers, but the suppliers seem to have taken by heart his advice, with more and more mergers and takeovers these past few years.
The most recent bid comes from auto parts manufacturer BorgWarner Inc, which decided to purchase Remy International Inc, a producer of electric and hybrid motors, with the transaction valued at around $950 million. The buyer’s intention is to better position itself in the growing field of electric and hybrid vehicle market. BorgWarner has offered $29.50 per share, making it 44 percent above Remy’s closing price of $20.53 on Friday last week. Remy’s shares were now trading at $29.15 before the stock market opened on Monday morning. Meanwhile, BorgWarner’s shares are currently being valued at $54.01. “The hybrid motor portfolio should help BorgWarner benefit from the progression of hybrid technology,” commented RBC Capital Markets LLC analyst Joseph Spak in a note addressed to clients. Remy has the largest hybrid motor production and testing facility in North America and the deal, expected to be completed sometimes during the fourth quarter, has an enterprise value of $1.2 billion, according to BorgWarner.
Meanwhile, the new parent company is one of the largest suppliers of turbocharging technology, which has become almost ubiquitous as carmakers search for technologies that can lift fuel economy without impairing performance, in order to meet the tougher gas mileage and emission requirements across the globe. The adviser of the purchasing company was Bank of America Merill Lynch, while Remy International was assisted by UBS Investment Bank.