Fiat Chrysler Offloads Magneti Marelli Parts Unit for $7.1 Billion

A key goal of Fiat Chrysler Automobiles’ financial fitness regimen, started under former CEO Sergio Marchionne, has come to pass under his successor, Mike Manley.

On Monday morning, FCA announced the sale of its Italian parts unit, Magneti Marelli, to Japan’s Calsonic Kansei, itself owned by KKR & Co. The deal, worth $7.1 billion, sees the parts unit don the name Magneti Marelli CK Holdings. It’s likely very good news if you’re an FCA shareholder.

In a joint statement, FCA and Calsonic Kansei said the acquisition, once approved, would create the world’s seventh largest independent automotive parts supplier. Magneti Marelli specializes in lighting, electronics, powertrain components, suspension parts, and exhaust.

“FCA has also agreed to a multi-year Supply Agreement that will further strengthen a mutually beneficial relationship for both Magneti Marelli and FCA’s expanding model range and which will sustain Magneti Marelli’s Italian business operations, positioning it strongly for continued growth and success in the future,” the automaker said.

Once the transaction closes in the first half of 2019, Calsonic Kansei CEO Beda Bolzenius will take the helm of the unified, Japan-based company. Current Magneti Marelli CEO Ermanno Ferrari will sit on the company’s board.

Marchionne had hoped to create a slimmer FCA, and shedding Magneti Marelli was at the top of that list. Early plans to spin off the parts unit collided with market storm clouds in Italy. Rather than threaten the company’s future with a stock listing, the automaker opted for an outright sale, potentially bringing a payday to FCA shareholders.

Joel Levington, a senior credit analyst at Bloomberg Intelligence, claims the sale might create $2 billion in dividends for investors.

“Having carefully examined a range of options to enable Magneti Marelli to express its full potential in the next phase of its development, this combination with Calsonic Kansei has emerged as an ideal opportunity to accelerate Magneti Marelli’s future growth for the benefit of its customers and its outstanding people,” said FCA CEO Mike Manley in a statement.

“The combined business will continue to be among FCA’s most important business partners and we would like to see that relationship grow even further in the future.”

Media reports from September claimed FCA wasn’t willing to drop below a $7 billion price tag in its negotiations with KKR, rejecting an earlier offer from the company.

[Image: Magneti Marelli]