Despite Fiat Chrysler Automobiles’ earlier plans to spin off its Magneti Marelli parts business into a separate business entity, much as the automaker did with Ferrari and CNH Industrial under Sergio Marchionne’s leadership, FCA is still reportedly considering selling the unit to private equity firm KKR. The firm last year purchased Japanese parts maker Calsonic Kansei from Nissan for $4.5 billion, and intends to merge that business with Magneti – assuming it’s able to negotiate a cheaper acquisition deal than the $7 billion FCA is currently seeking.
According to Bloomberg, KKR could be looking to spend more like $6 billion for Magneti Marelli, as Fiat Chrysler’s plans to spin off the business have deteriorated, leaving the automaker little other recourse. FCA reportedly chose KKR over Apollo Global Management with which to initiate acquisition talks, despite Apollo having offered more than $7 billion.
Bloomberg‘s sources say that there have already been two extensions to FCA’s and KKR’s end-of-August deadline to hammer out an acquisition deal, and the talks might still fall through if the two companies can’t agree on a price.
Meanwhile, some analysts believe Magneti Marelli to be worth less than either FCA’s valuation or KKR’s. French auto supplier Faurecia’s trades at roughly 3.8 times expected EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortization). Apply the same scale to Magneti Marelli, and it could be worth less than 4 billion euros (about $4.6 billion US).
Nearly a century old, Magneti Marelli employs some 43k people worldwide producing automotive parts like lighting, powertrain, electronic, and suspension components and systems. It became a subsidiary of Fiat in 1967.