France’s Faurecia has agreed to buy Japanese car navigation system maker Clarion for $1.3 billion.
French automotive parts maker Faurecia has agreed to acquire Japanese car navigation system manufacturer Clarion, a unit of Hitachi, for $1.3 billion, in a bid to strengthen its position in the automotive technologies segment.
Clarion is 63.8% owned by Hitachi, while France’s auto maker Groupe PSA owns a 46% stake in Faurecia.
Faurecia said it has agreed to pay 2,500 Japanese yen per Clarion share, a premium of 10.5% to the target’s October 25 closing price of 2,263 Japanese yen. The total price comes up to 141 billion Japanese yen. The deal multiple is 5.7 times the core earnings on March this year. This includes operational cost savings by 2022 of around 90 million euros.
“This project is very exciting for Faurecia as it would position us as a leading player for cockpit systems integration, able to offer unique user experiences. The combined product and technology offer of Faurecia and Clarion and our complementary geographic presence and customer portfolios would create significant value for all stakeholders” said Faurecia’s chief executive officer Patrick Koller.
The latest transaction is among the several made by Hitachi recently, which started divesting its non-core divisions to boost profitability.
“The Clarion deal looks good in that Clarion’s presence in Asia and the Americas will diversify Faurecia’s business mix. However, the Faurecia share price is being hit by the negative read-across from Valeo,” according to Faurecia and Valeo shareholder Gregoire Laverne of Roche Brune Asset Management.
Faurecia said that it also plans a new unit headquartered in Japan which will be named Faurecia Clarion Electronics Systems.
Shares in Faurecia declined on Friday, mainly dragged down by the profit warning released on Thursday by Faurecia’s rival Valeo. Valeo’s stock in turn dropped more than 19%, which the company attributed to the harsher European emissions tests and the drastic sales decline in China for its decision to cut its targets.