Faurecia to buy 60% of lighting firm Hella; deal worth EUR6.8 bn

French automotive supplier Faurecia SE is to take over German family-owned lighting and electronics specialist Hella in a deal valued at EUR6.8 billion, out beating rival bidders like France-based Plastic Omnium and Germany's Mahle Group.

Faurecia will purchase a 60% stake from Hella’s founding Hueck family through a mixture of cash and stock, to become the 7th largest global automotive supplier. Faurecia will make a public offer for the remaining shares at EUR60 a share plus a dividend of EUR0.96 apiece. The gross offer price will amount to EUR60.96 per Hella share; this corresponds to the share purchase price agreed with the pool shareholders and a total value of all Hella shares of approximately EUR6.8 billion.

This corresponds to a premium of 33% on the closing price of Hella GmbH & Co. KGaA on 26 April 2021 and of 24% based on the weighted average price of the Hella Share of the last three months until 26 April 2021.

The Hueck family will own as much as 9% of the combined company.

The closing of the transaction is subject to regulatory approvals and is expected in early 2022.

The deal, one of the biggest in the European auto parts industry in recent years, would create a company with annual sales of about EUR23 billion -- forecast by Faurecia to exceed EUR33 billion in 2025 -- and some 150,000 employees. Faurecia said the combination will be the world’s seventh-largest auto-parts supplier, and better placed to sell electric mobility products and automated driving services to the industry.

Lippstadt-based Hella, which traces its roots back to 1899, makes lighting and electronic components, as well as radar sensors for driver-assistance systems. The Huecks have controlled Hella since 1923 and took the company public in 2014.

In February, Hella completed the sale of its front camera software business to Volkswagen AG as part of what it called “stringent portfolio management,” while reaffirming its commitment to automated driving.

"As family shareholders, we are fulfilling our corporate and entrepreneurial responsibility. This move will further improve the strategic positioning of the company – for the benefit of Hella and its 36,000 employees. At the same time, the family will continue to accompany the development of this leading European company as a shareholder in Faurecia," said Dr Jürgen Behrend, Chairman of Hella.

Patrick Koller, CEO of Faurecia, said that by combining the product portfolios and market reach, the companies will focus on innovation, with more electronic and software content and enhanced execution quality. “Our financial profile will remain solid, with strong attention paid to sustained cash generation and deleveraging the company.”

The combination of Hella and Faurecia will create a global technology leader covering both a broad customer portfolio and significant future trends in the automotive sector. Faurecia’s good access to key Chinese, Japanese and US original equipment manufacturers will create new growth potential for the business areas of Hella. Further opportunities arise primarily in the areas of Electric Mobility, Automated Driving, Cockpit of the Future, and Lifecycle Value Management (including Aftermarket and Special Applications). Throughout these the two companies have complementary business activities which together offer a high-performance portfolio with broad market access.

The transaction will for example create a global supplier for Electric Mobility with a comprehensive range of services. Hella will contribute its strong portfolio in energy management, sensors and actuators, while Faurecia will provide sophisticated hydrogen storage solutions and stacks systems. In Automated Driving, the combination will also create a global technology leader with a broad range of products and systems. To this end, Faurecia is contributing the expertise of its subsidiary Faurecia Clarion Electronics, among others.

Based on the close development partnership between the two companies regarding innovative lighting solutions for vehicle interiors, which has been in place since 2018, these activities will be further accelerated by incorporating Faurecia’s competencies in Seating and Interiors as well as the Hella expertise in Interior Lighting, sensors and electronics for vehicle access systems. Further benefits will arise from combining the Hella aftermarket activities and business with specialty vehicle manufacturers with Faurecia’s Lifecycle Value Management activities.

To fully leverage the potential of both partners, the Hella focus areas are to be integrated into the Faurecia Group while retaining a high degree of operative responsibility. At the same time, the business combination agreement between the two companies foresees the continuation of Hella’s multi-pillar business strategy and consistent investments in the development of future automotive technologies in order to secure its position as a technology and market leader.

Faurecia’s offer document is expected to be published mid-September after approval by the German regulator BaFin.

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