(Reuters) -Canadian auto parts maker Magna International Inc on Thursday agreed to buy Swedish rival Veoneer Inc for about $3.8 billion in cash to boost its efforts to build driver assistance tech geared toward autonomous vehicles.
Veoneer makes advanced driver assistance systems, known in the industry as ADAS, that add features ranging from collision warning to parking assist. Some systems collect data from cameras and radar to monitor surroundings, interpret the situation and take action.
Veoneer’s Stockholm-listed shares rose 55% in early trade.
While fully self-driving vehicles are years away, assisted-driving features, such as adaptive cruise control, are becoming more common and the deal will help Magna to close the gap with market leaders Aptiv, Bosch and Continental.
“With the recent acquisition of Veoneer, we believe Magna is likely a fourth leading player with the opportunity to more directly compete with the big three,” Jefferies analyst David Kelley wrote in a research note.
Magna will buy out Veoneer’s outstanding shares for $31.25 each, and the acquisition represents an enterprise value of $3.3 billion including debt, the companies said in a joint statement.
Stockholm-based Veoneer’s market value was $2.23 billion based on its Thursday closing price, Refinitiv Eikon data showed.
After its 2018 spin-off from Sweden’s Autoliv, the world’s largest producer of airbags and seatbelts, Veoneer suffered from a slump in light vehicle production and a global chip shortage, but demand has rebounded this year.
Veoneer on Friday reported 116% jump in second-quarter net sales to $398 million as North American and European carmakers add radar and camera systems in their upcoming models.
The acquisition will expand Magna’s ADAS business with major customers, provide access to new customers and regions and save about $100 million in annual costs by 2024, the company said.
The boards of both companies have approved the deal, which is expected to close by the end of this year.
Reporting by Anirudh Saligrama and Derek Francis in Bengaluru, Supantha Mukherjee in Stockholm; Editing by Subhranshu Sahu and Barbara Lewis
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