Magna is buying the division from New York-based investment firm SSW Partners LP, which owns VeoneerNathan Denette/The Canadian Press
Magna International Inc. MG-T has expanded its advanced driving technology business with the US$1.5-billion purchase of Veoneer LLC’s active safety division.
Stockholm-based Veoneer makes car radar, camera and other monitoring systems. The all-cash purchase of the division will complement Magna’s product lines and boost its content per vehicle, while positioning the Aurora, Ont.-based vehicle and parts maker as a leader in the fast-growing market of advanced driver assistance systems (ADAS), said Magna chief executive officer Swamy Kotagiri.
“It also adds significant engineering resources and software expertise,” Mr. Kotagiri said on a conference call with analysts on Tuesday.
Magna is buying the division from New York-based investment firm SSW Partners LP, which owns Veoneer. The active safety business has forecast yearly sales worth US$1.1-billion, 3,700 employees, four manufacturing sites and 15 engineering offices in eight countries.
“This transaction provides an infusion of electronics engineering expertise,” Mr. Kotagiri said, noting the division employs 2,200 engineers who can support Magna’s other product lines.
ADAS technology is designed to increase road safety by using cameras and radar to detect pedestrians, lane markers, traffic signals and blind spots. The systems are used by automakers in everything from cruise control to headlight settings.
Mr. Kotagiri said the new business combined with Magna’s ADAS products will see 30-per-cent growth by 2024 to US$3-billion. The global market is expected to reach US$50-billion by 2030, he said.
Mark Neville, a Bank of Nova Scotia stock analyst, said in a note to clients he likes the deal. “It adds significant scale and capabilities to Magna’s ADAS business,” Mr. Neville said. “It puts the balance sheet to work without stressing it, and it was done at a reasonable valuation.”
Magna executives on the conference call declined to say where Magna ranks in the global ADAS market, beyond describing the company as a “leader.” Pat McCann, Magna’s chief financial officer, said the purchase does not come with debt obligations, excluding pensions and leases. “It’s basically a cash-free, debt-free transaction,” Mr. McCann said.
Magna’s existing ADAS business had more than US$550-million in sales last year, out of the company’s total revenue of US$36-billion. Magna makes complete vehicles and car components at factories around the world, employing more than 158,000 people at 343 manufacturing facilities. Its 2021 profit was US$1.6-billion.
SSW Partners was founded in 2021 by three veteran investment bankers: Eric Schwartz, Joshua Steiner and Antonio Weiss.
Magna had signed a deal to buy all of Veoneer last year, but failed to complete the transaction after it was outbid by SSW Partners and chip maker Qualcomm Inc., which paired up to buy the company in a deal valued at US$4.5-billion.
Qualcomm subsequently acquired Veoneer’s Arriver business from SSW Partners for an undisclosed sum.
Veoneer CEO Jacob Svanberg said Magna is the right long-term home for the active safety business.
“The combination of both businesses creates durable value and accelerates an already exciting growth trajectory for Veoneer’s employees, products and customers,” Mr. Svanberg said in a news release.
Veoneer said it continues the process of finding the best long-term home for its restraint control systems business.
The sale of the active safety business is expected to close near the middle of 2023, subject to regulatory approvals and other customary closing conditions.
With files from The Canadian Press