Motherson' board to acquire Dutch based Reydel automotive; stocks soar over 5 percent

Last Updated: Tue, Apr 03, 2018 11:38 hrs
Employees of Motherson Sumi Systems Limited, work on a car wiring assembly line inside a factory in Noida

Motherson Sumi Systems has informed the stock exchanges that it's board had completed the finalisation of acquisition of Reydel automotive group. The acquisition is priced at $201 million.

Reydel, an automotive company was previously held by Cerberus Capital Management. The company is in the business of manufacturing of interior components and modules for automotive customers. The product portfolio of Reydel includes panels, door panels, console modules, cockpit modules. The company employs 5650 people and the acquisition is expected to enable Motherson and Reydel capitalise on newer opportunities.

Here are other details about Reydel:

  • Revenue for year ending December 31 2017 stood at $1048 million. EBITDA (Earnings before Interest, Tax, Depreciation, and Amortisation) stood at $68 million.
  • Reydel has 20 offices spread across 16 countries.
  • Date of incorporation: June 5, 2015

Motherson Sumi will be holding 100% stakes in Reydel after the acquisition.

The acquisition will be subject to anti-trust approvals which are expected to be closed within a time-period of 4-6 months.

Vivek Chaand Sehgal, Chairman at Samvardhana Motherson group was quoted in an official release as saying, "the synergistic combination of complimentary portfolios will create a stronger business. We are very excited about this partnership. It brings us closer to meeting our 2020 targets and helps us achieve '3CX15', our strategy to not have any component, customer or country contributing more than 15% to our business."

Founded in 1975, Motherson Sumi Systems is a joint venture between Samvardhana Motherson Group and Sumitomo Wiring Systems of Japan. The company is India's leading automotive mirror and wiring harness manufacturer for passenger cars. It also supplies plastic components and modules to the automotive industry

The stock had opened to a 5% intra-day gain during the pre-opening session. At 11:30 AM, the stock gained 11.65 points or 3.59% up to quote a price of Rs 335.90 per share. The BSE Sensex during the same time recorded a loss of 70.18 points or 0.21% at 33185.18.

Analysts at Motilal Oswal suggested in a note that the Reydel acquisition was "value accretive" and a good fit for Motherson's SMP/MATE business. The deal is expected to add newer customers, in newer countries with fresher capabilities.

Analysts said they were awaiting for additional details, but reading into MSS's current earnings per share, said it was a stock worth buying. "Maintain BUY with a TP of Rs 437, valuing 25x FY20E consol. EPS (in line with historical average)," read the note.

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