Continental AG will pay $1bn to acquire Motorola’s global automotive electronics business as the German tyre and car parts maker expands into vehicle computing and communications technology.
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According to Reuters, Continental said on Monday that the addition of Motorola’s business, which had worldwide sales of nearly $1.6bn in 2005, was expected to double overall sales of Continental Automotive Systems (CAS), its automotive electronics division, in North America. Major customers for the business include General Motors, Ford, DaimlerChrysler, BMW and Cummins.
“The integration of Motorola’s automotive unit will enhance Continental’s ability to offer our customers long-term technology solutions in the areas of telematics, safety electronics, powertrain as well as interior and sensor technologies,” CAS president Karl-Thomas Neumann said in a statement cited by the news agency.
The company expects the transaction to close in the first half of 2006, subject to approval by antitrust authorities.
A Continental spokesman reportedly added that his company would not take on any debt from Motorola as part of the acquisition.
According to Reuters, the company said that telematics, which combines computing and communications technology, would allow it to intensify and expand the integration of features that help cars to communicate with one another to avoid accidents.
CAS specialises in electronic stability programmes, which help to prevent deadly rollovers, the report noted.
According to Reuters, Metzler Bank analyst Juergen Pieper tentatively approved of the strategic expansion into telematics, but cautioned that while the purchase price seemed reasonable, the lack of earnings figures for Motorola’s business complicated a more comprehensive analysis.
“I like the basic idea of strengthening a growth business like Continental Automotive Systems. The whole field of navigation as a product enjoys growth rates that are clearly above 10% worldwide,” he reportedly said, estimating that Motorola’s automotive electronics activities had an operating margin around 10%.
Reuters noted that Continental has said it aimed to spend up to EUR4bn ($US4.85bn) for acquisitions and specifically singled out targets in North America and Asia for its electronics business grouped under CAS.
