Valeo buys out Siemens from EV-components venture in $317M deal

Europe

Valeo agreed to acquire Siemens’ stake in their 5-year-old electric-car components venture to bolster its position in the rapidly expanding EV market.

Valeo will buy the 50 percent holding for 277 million euros ($317 million), the supplier said in a statement. The deal will raise the French company’s net debt by 741 million euros.

The acquisition “reveals poor prospects for profitability,” Citigroup analyst Gabriel Adler wrote in a note, saying the company’s outlook on margins and revenue for the business is weaker than expected.

The unit is expected to break even this year on a pretax cash flow basis and improve revenue and profit margins in the coming years.

“Strategically, this is a very important step for Valeo,” CEO Christophe Perillat said on a call with journalists late Wednesday. “The terms of the deal are good, and it comes at the right time.”

Valeo also announced a plan to develop a new electric motor with Renault. The companies said they would be the first to mass produce a 200-kilowatt electric motor without using rare earth materials, starting in 2027. Production of the motor for the automaker’s own needs will be based at Renault Group’s plant in Cléon, France.

EV shift

Suppliers are overhauling their operations to keep pace with an accelerating shift to battery-powered cars.

Faurecia this week unveiled new financial targets and branding after taking control of rival Hella in a bid to sharpen its own EV offerings.

Valeo and Siemens joined forces on Valeo Siemens eAutomotive in 2016 to make e-motors, axles and powertrain electronics for plug-in hybrids and full-electric vehicles.

On Wednesday, Perillat said the market “is growing very strongly” and predicted annualized 17.5 percent growth to 92 billion euros in 2030.

Automakers such as Stellantis and Volkswagen Group are rolling out new EV models and production plans, but it’s unclear to what extent major parts such as electric motors will be made in-house.

Perillat reiterated a previous forecast put forth by the company that 40 percent of the overall market will be outsourced to automotive suppliers.

By the end of 2022, more than 90 electric and plug-in hybrid models will be fitted with Valeo’s electric powertrain systems, motors, inverters or onboard chargers, the supplier said.

Siemens said the sale of its stake would boost its profits by around 300 million euros in its fiscal second quarter, with a closing of the deal expected in July.

The company has been revamping its portfolio to focus on software and away from equipment.

Valeo mapped out a series of financial targets for the Erlangen, Germany-based unit that will be combined with its own ‘Powertrain Systems’ business. These include:

  • Pre-tax cash flow of 350 million euros in 2025
  • Annual sales growth of more than 12 percent to reach 8.5 billion euros by 2025
  • EBITDA margin to widen from 5.8 percent in 2021 to more than 8 percent in 2022 and more than 11 percent in 2025

Reuters contributed to this report

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