Fiat Chrysler shares are higher Monday, as the European-US car manufacturer has agreed to sell its high-tech car components manufacturing unit, Magneti Marelli, to Japanese car parts maker, Calsonic Kansei.
The deal will move control of Magneti Marelli to the Japanese firm, although Fiat is set to benefit from a multi-year supply agreement.
By 1230 BST, Fiat shares were 5.28% higher at €14.15. The stock has been trending lower in recent weeks.
Fiat Chrysler’s Magneti Marelli deal
Earlier Monday, Fiat shared news of the deal in which Calsonic Kansei, backed by private equity group, KKR, will purchase the Magneti Marelli unit for €6.2 billion. Negotiations over the deal are said to have been ongoing for months.
The sale also represents the first major decision taken by Fiat’s CEO, Mike Manley, who took the reins in July after the unexpected death of Sergio Marchionne.
“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,” Manley said. “The transaction also recognises the full strategic value of Magneti Marelli and is another important step in our relentless focus on value creation.”
Calsonic Kansei’s CEO was equally upbeat on the deal, that will see the creation of a new major high-tech car parts manufacturer, at a time when the auto industry is undergoing great change.
“Our industry has gone through fierce change in recent years and the phase to come will be even more dynamic,” said Calsoni Kansei’s CEO, Beda Bolzenius.
New business name
Upon the closure of the transaction, expected to be some time in the first half of 2019, the combined business will operate under the name, Magneti Marelli CK Holdings.
The new group will be led by Calsonic Kansei’s CEO, Bolzenius. However, it will retain its existing Italian Magneti Marelli head office, in Milan. Magneti Marelli’s CEO will also join the Board of the new, combined business.
“This is a moment of great opportunity for all our people to be part of a secure, growing and independent company of considerable scale that can look to the future with energy, ambition and confidence,” said Magnetti Marelli’s CEO, Ermanno Ferrari.