Lear Corp, a maker of auto seats and electrical power systems, said it would buy automotive leather supplier Eagle Ottawa LLC for $850 million to strengthen its core seating business and boost its luxury seats portfolio.
Higher vehicle production globally has led to a rise in sales of car seats and other auto parts, primarily in the United States and China.
Privately held Eagle Ottawa is known for the superior quality and craftsmanship of its products and is the world's largest provider of automotive leather, Lear said.
Lear gets about three-fourths of its revenue from its seats business and counts Ford Motor Co, General Motors Co and BMW AG among its top customers.
Eagle Ottawa has annual sales of about $1 billion and also supplies to Ford, General Motors and BMW.
Lear expects the deal to add about 5 percent to its full-year earnings upon completion, which is expected in the first quarter of 2015.
The company intends to fund the transaction with cash on hand and debt, Lear said in a statement.
Citigroup Global Markets Inc and Guggenheim Securities are Lear's financial advisers while Winston & Strawn is its legal counsel for the deal.
Up to Wednesday's close of $98.11, Lear shares had risen about 21 percent this year.
(Reporting by Mridhula Raghavan in Bangalore; Editing by Kirti Pandey and Simon Jennings)