Magna magnifies automotive position with acquisition and joint venture

30 July 2021

Supplier Magna International (Magna) is working to strengthen its position within the automotive industry. Recently signing a joint venture (JV) with LG Electronics (LG), it has established LG Magna e-Powertrain. Headquartered in Incheon, South Korea, this new company will focus on developing electric-drive components.

Magna also confirmed it intends to acquire the automotive-safety company, Veoneer. The definitive merger agreement will allow Magna to bolster its advanced driver-assistance systems (ADAS) activities, and provide access to new customers and regions, including Asia. The transaction has already been approved by both boards of directors, with Veoneer’s board unanimously recommending stockholders approve the proposal.

JV jumpstart

LG Magna e-Powertrain will bring together Magna’s automotive manufacturing expertise with LG’s electric component know-how. Utilising this experience, the new JV will build electric motors, inverters and onboard chargers for certain automakers and related e-drive systems. These powertrain components will provide carmakers with a scalable portfolio, from entire electric solutions to integrated operating software and controls.

The design, engineering and manufacturing applications delivered by LG Magna e-Powertrain will allow both parent companies to quickly react to market trends and capitalise on the shift to electromobility. With over 1,000 employees in the US, South Korea and China, the JV will have a global presence.

Leading this charge as CEO will be Cheong Won-suk, who spent 20 years with LG, most recently as the vice president and head of LG vehicle-component solutions. Javier Perez will join as COO from Magna, overseeing day-to-day operations, having spent 25 years within the world of automotive manufacturing.

‘Partnering with Magna enables LG to scale up its global production, provide additional business opportunities and offer synergies in procurement and technological innovation,’ said Won-suk. ‘The integrated and collaborative approach is expected to deliver quickly for customers and capitalise on the rapid growth of the worldwide electric-powertrain market.’

‘The market for e-motors, inverters and electric-drive systems is expected to have significant growth between now and 2030. Our joint-venture company brings together experts from Magna and LG to deliver a world-class portfolio of electric solutions,’ said Perez. ‘Leveraging existing technologies, engineering capabilities and global footprints, LG Magna e-Powertrain seeks to enable advancements that help automakers achieve some of the biggest challenges ahead in electrifying their full vehicle line-ups.’

Acquiring advanced-safety systems

Pulling Veoneer into the fold gives Magna an additional foothold in the smart safety space. It will also take control of the safety company’s leading position in the world of restraint-control systems. Additionally, Magna expects to operate Veoneer’s Arriver sensor-perception and drive-policy software platform as an independent business unit.

Once the transaction is closed, Veoneer will be combined with Magna’s existing ADAS businesses and integrated into its electronics operating unit. These combined businesses are expected to build relationships with both organisations’ automotive customers, suppliers, and technology partners.

‘Veoneer’s complementary technology offerings, customer base, and geographic footprint make it an excellent fit with our ADAS business, and the acquisition strengthens our global-engineering and software-development talent base,’ said Magna CEO Swamy Kotagiri. ‘We expect the combined entity to be an industry leader in active-safety solutions, to enhance its position in complete ADAS systems, and to be well-positioned for the transition towards higher levels of autonomy. The acquisition is also consistent with our go-forward strategy to accelerate investment in high-growth areas.’

Under the terms of its new merger agreement, Magna will pay $31.25 (€26.33) per Veoneer share in cash, representing an equity value of $3.8 billion. This will post the safety company’s enterprise value at $3.3 billion, inclusive of its cash, net of debt, and other debt-like items as of 31 March 2021. The transaction will establish a business with pro forma 2020 ADAS sales of $1.2 billion. It will boast capabilities with various components, like radar and LiDAR, as well as software functions including perception and drive policy. By 2024, the pair is expected to achieve annual run-rate synergies of roughly $100 million. ‘This is a compelling transaction for all stakeholders. It will deliver significant and immediate value to Veoneer stockholders through an attractive premium to our trading price, and provide new opportunities for our employees to join one of the most capable suppliers in the mobility space,’ said Jan Carlson, Veoneer’s chairman, president and CEO. ‘In addition, combining forces with Magna will allow the combined business to elevate its status as a full-systems ADAS supplier, which should benefit our customers, supplier partners and ultimately consumers.’