KKR's Calsonic buys Fiat Chrysler parts firm Magneti Marelli for $7.1 billion

Magneti Marelli’s sale to KKR’s Calsonic Kansei creates an auto-parts maker with more than $17 billion in annual revenue and about 65,000 workers from Tokyo to Milan

Fiat Chrysler's (FCA) bottom line is now a little fatter.

Fiat-Chrysler Automobiles officially has a buyer for its Magneti Marelli supplier division in Japan's Calsonic Kansei, itself owned by USA -based private equity firm KKR.

One of the biggest tasks left to Mike Manley when he took over from Sergio Marchionne as chief executive of Fiat Chrysler Automobiles was the pending spin-off of Magneti Marelli. The combined businesses of Calsonic Kansei and Magneti Marelli will create the world's 7th largest global independent automotive components supplier based on total revenues.

FCA shares were up 3.6 percent at 1358 GMT as investors welcomed the hefty price tag, which will boost FCA's net cash position, raise expectations of a share buyback and pave the way for dividend payments the carmaker promised under its new five-year strategy plan unveiled in June. Calsonic initially made a bid of $6.7 billion, according to the report.

Marchionne had set in motion a process to spin off the unit and distribute its shares to FCA shareholders by early 2019, but said in June that FCA would still be "receptive" to an offer.

The Transaction represents a unique opportunity to combine two successful businesses to create one of the leading global independent automotive components suppliers, with combined revenues of Euro 15.2 billion (JPY 1,975 billion).

Magneti Marelli, founded in 1919, employs some 43,000 people and operates in 21 countries.

Calsonic is paying around 17 times next year's estimated earnings for Magneti Marelli, according to Galliers' calculations. The agreement represents a transaction value of Euro 6.2 billion.

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.

Specialized in lighting, powertrain, and electronics, Magneti Marelli is responsible for Fiat Chrysler shares shooting up on the stock exchange.

The transaction is expected to be completed in the first half of 2019, and the new combined company will be led by Beda Bolzenius, who is now the CEO of Calsonic Kansei.

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