Fiat Chrysler agrees to sell Marelli to KKR’s Calsonic Kansei

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MILAN – Fiat Chrysler Automobiles agreed to the sale of its high-tech auto parts unit, Magneti Marelli, to Calsonic Kansei of KKR & Co. in a transaction of 6.2 billion euros ($ 7.1 billion), the first major deal for the automaker under new CEO Mike Manley.

The new company will be called Magneti Marelli CK Holdings, the companies said Monday in a statement.

FCA will enter into a long-term supply agreement with its former unit that will maintain Marelli's presence in Italy and maintain the level of employment.

The transaction creates an auto parts maker with more than $ 17 billion in annual revenue and approximately 65,000 employees from Tokyo to Milan.

The sale is one of the first important milestones for Manley, who took over FCA days before the death of his predecessor Sergio Marchionne in July. It is also the first M & A transaction conducted by Chairman John Elkann since his so-called "maestro" deal has passed away.

Marchionne, who initially preferred to divorce the company by distributing shares to investors, had said that FCA was open to a "big check". FCA opted for a sale of Magneti Marelli instead of a listing on the Milan Stock Exchange after market conditions. deteriorated in the midst of global trade and political uncertainty in Italy, as well as profit warnings from car manufacturers and suppliers.

Worsening conditions

Daimler gave its second profit warning in four months on Friday and automotive supplier Continental AG lowered its outlook in August. Volvo Cars delayed the plans for a share sale in September, with the timing "not optimal" and Aston Martin's shares have collapsed since the first public offer.

FCA could now consider rewarding shareholders with the Marelli sale. The unit was able to provide Fiat with more than $ 2 billion in dividends, according to Joel Levington, a senior credit analyst at Bloomberg Intelligence.

Japanese companies announced more than $ 200 billion in acquisitions this year, an increase of 60 percent over the same period in 2017, according to data collected by Bloomberg. The deal volume has already reached the highest annual number in more than a decade, according to the data.

FCA & # 39; s conversations with KKR began months ago under Marchionne, people who were familiar with the issue mentioned earlier. As part of the negotiations, FCA rejected an offer because the two parties were divided on the price by about 1 billion euros, people who were familiar with the issue said in September.

Before holding talks with KKR, Fiat was interested by other potential buyers, including Apollo Global Management, Bain Capital and an unnamed Asian parts supplier, people who were familiar with the issue in August.