Faurecia says it has reached binding agreements with Clarion and Hitachi, the controlling shareholder owning 63.8% of Clarion, for a tender offer to acquire 100% of the shares of the Japanese supplier for EUR1.1bn.
Clarion is a major Japanese supplier of in-vehicle-infotainment (IVI) and full digital audio systems, HMI and advanced driver assistance systems, connectivity and cloud-based services.
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With its core competences in electronics and software integration, Faurecia says the acquisition would significantly reinforce its offer for cockpit systems integration.
As part of the transaction, Faurecia and Hitachi Automotive Systems have also reached an agreement for a business alliance, within which Clarion and Hitachi Automotive Systems would be able to combine their product offers to propose autonomous driving solutions to OEMs.
“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,” said Faurecia CEO, Patrick Koller.
“In addition, our business alliance with Hitachi Automotive Systems would enable solutions for full autonomous driving to OEMs. 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.”
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By GlobalDataFor the fiscal year ending March 2018, Clarion, headquartered in Saitama (near Tokyo), Japan, achieved sales of EUR1.4bn (US$1.6bn). It employs 7,500 people and has seven manufacturing sites (of which six are in low cost countries) and a presence in 16 countries.
The company has undertaken a major transformation of its product portfolio from its traditional audio/infotainment systems towards its advanced driver assistance and HMI systems, including driver monitoring and autonomous parking.
Faurecia is deploying its cockpit integration strategy based on its positions in seating and interiors. The Group’s ambition is to become the leading supplier of systems for user experiences integrated through an electronics management system: the ‘Cockpit Intelligence Platform.’
As part of the strategy, the Group has built a foothold in connectivity and infotainment through the acquisitions of Parrot Automotive (expert in Android solutions) and a controlling stake in Coagent Electronics in China.
The acquisition of Clarion would give Faurecia size as a major player in cockpit electronics and software integration with a strong global presence.
The functionalities managed by the Cockpit Intelligence Platform will include advanced safety, intuitive HMI, driver information and assistance, IVI and immersive digital sound, comfort, wellness and thermal management.
Creating these personalised user experiences will require occupant monitoring as well as personal and contextual information. With the addition of Clarion’s complementary competences, in particular for image processing, sensing and driver information, Faurecia will be positioned to provide disruptive solutions.
Synergies will be realised by leveraging the combined offer for intelligent cockpit hardware and software solutions, as well as the complementary customer, geographic and industrial footprints.
For Clarion, this deal would support the expansion of their customer base particularly in Europe and accelerate their transformation. Faurecia adds it would benefit from Clarion’s customer relationships to achieve a breakthrough in its presence with Japanese OEMs.
Faurecia intends to create a new Business Group headquartered in Japan, named Faurecia Clarion Electronics Systems, regrouping all Faurecia’s competences in this domain. The Business Group would employ almost 9,200 people, more than 1,650 software engineers and have more than EUR2bn of revenues by 2022.
Faurecia will offer JPY2,500 per share representing a premium of 31.2 % versus average of last 20 trading days and 10.5% versus last trading day (October 25, 2018). This corresponds to a total purchase price of around EUR1.1bn.
These synergies would be split almost equally between revenue and cost synergies. The bridge financing related to the acquisition has been fully secured and the size of this operation is compatible with Faurecia’s financial capabilities and acquisition criteria.
Following the transaction, in 2020 Faurecia sales should reach more than EUR21bn with EPS accretion.
The transaction is subject to customary regulatory clearances and employee representative consultations. The tender offer will be launched once appropriate merger control clearances are underway.
Pursuant to the agreement signed today, Hitachi has given an undertaken to tender its shares representing 63.8% of the share capital of Clarion.
Clarion also intends to recommend its shareholders to tender their shares when the tender offer is launched. Faurecia intends to implement a squeeze-out following the settlement of the tender offer.
The project has received the support of both the Hitachi and Clarion Boards of Directors. Closing of the transaction is expected during the first quarter of 2019.
