Exclusive - Fiat Chrysler exploring $3.3 billion sale of auto parts unit Magneti Marelli

LONDON/MILAN (Reuters) - Fiat Chrysler Automobiles (FCA) is considering whether to sell its auto parts maker Magneti Marelli after receiving interest from potential buyers, according to sources familiar with the matter.

The Fiat logo is pictured at a car dealership at Motor Village in Los Angeles, California October 13, 2014. REUTERS/Mario Anzuoni

At least two U.S. private equity funds are looking to team up with industry players and submit joint bids for Magneti Marelli, which supplies all major carmakers in Europe, the Americas and Asia, three sources told Reuters.

A recent offer, by a group including a U.S. buyout fund and valuing the business at less than 2.5 billion euros (2 billion pounds), was rebuffed in June as FCA would not agree to sell for less than 3 billion euros, one of the sources said.

Gualberto Ranieri, a U.S.-based spokesman for FCA, said Magneti Marelli is not for sale.

Debt-laden FCA could sell the unit either in parts or in entirety, the sources said, adding that no final decision on a disposal had been taken.

Magneti Marelli has often been touted as a takeover target. While FCA has always denied any interest in selling, the sources said the Italian-American carmaker had recently told interested parties it may reconsider its plans.

The world’s seventh-largest carmaker currently has its hands full with a planned flotation of sports car maker Ferrari, slated for after mid-October, and any decision on Magneti Marelli would be taken after that, the sources said.

Yet U.S. buyout funds have been working on the dossier for months, the sources said.

“Letters are piling up on Fiat’s table,” one of the sources said. “We expect Chief Executive (Sergio) Marchionne to react to these approaches sooner rather than later.”

A sale of the unit, which employs more than 38,000 and is present in 19 countries, could help FCA pay off some debt and fund a 48 billion euro investment plan.

The plan could gain traction as Marchionne’s plea to merge with rival carmaker General Motors is so far falling on deaf ears.

Magneti Marelli had revenue of 6.5 billion euros last year and an operating profit, including unusual items, of 204 million. It makes components for lighting, engines, electronics, suspension and exhausts, among other items.


The bidders would aim to gain full control of Magneti Marelli and later split it up based on their own expertise, the sources said. “Everyone will take a fair share of it,” said one.

A number of large buyout funds, mainly U.S.-based, are particularly interested in Magneti Marelli’s lighting unit, which could be carved out and turned into a standalone firm, the source said.

This unit is worth around 2 billion euros and could appeal to global players such as Valeo, Hella, Koido and Stanley, a sector banker said.

Asian players could also make a move, another source said, pointing to China’s Wanxiang Group as a possible bidder.

Auto parts makers have shown growing appetite for acquisitions as they look to boost their global presence.

Earlier this year Germany’s ZF Friedrichshafen completed the $13.5 billion acquisition of U.S. rival TRW Automotive Holdings.

Italian tyre maker Pirelli sold to ChemChina in March as part of a 7.3 billion euro deal.

Marchionne is in no rush to sell Magneti Marelli and will be picky when choosing a buyer to ensure a stable future supply of components to FCA plants, which churn out anything from Fiat 500s to luxury Maseratis.

Another source said FCA may also review strategic options for two smaller auto components units, Comau and Teksid, with revenues of 1.55 billion euros and 639 million respectively.

In 2012 Marchionne said Fiat could put Magneti Marelli on the block as an option to raise cash to lift its stake in Chrysler. Fiat completed its buyout of the U.S. unit last year.

Additional reporting by Massimo Gaia in Milan and Arno Schuetze in Frankfurt; Editing by Susan Fenton and David Holmes