Car parts group Faurecia swoops on Clarion in $1.3 billion deal

PARIS (Reuters) - France's Faurecia EPED.PA has agreed a 141 billion yen ($1.3 billion) deal to buy Japanese car navigation system maker Clarion 6796.T from Hitachi 6501.T to strengthen its presence in new auto technologies.

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The Clarion takeover is the latest in a flurry of deals among car components businesses, which are trying to keep up with a shift by carmakers into new technologies such as autonomous driving, connected cars and electric vehicles.

It also follows several divestitures by Hitachi, which has been shedding non-core operations in recent years to bolster profitability and focus on its main infrastructure business.

Car parts supplier Faurecia, which is 46 percent owned by Peugeot maker PSA PEUP.PA, said it would offer 2,500 yen per share for Clarion, representing a 10.5 percent premium to Clarion's closing price of 2,263 yen on Oct. 25.

The offer represented a total purchase price of 141 billion yen, Faurecia added, marking a transaction multiple of 5.7 times March 2018 core earnings, including operational cost savings estimated at 90 million euros by 2022.

However, Faurecia shares fell on Friday, dragged down by rival Valeo's VLOF.PA decline on a profit warning the previous day.

Valeo blamed industry disruption from the introduction of tougher European emissions tests as well as a sharp sales downturn in China for its decision to cut financial targets.

“The Clarion deal looks good in that Clarion’s presence in Asia and the Americas will diversify Faurecia’s business mix,” said Gregoire Laverne, of Roche Brune Asset Management, which owns shares in both Faurecia and Valeo.

“However, the Faurecia share price is being hit by the negative read-across from Valeo,” he added.

Faurecia said its post-deal sales should exceed 21 billion euros by 2020, with earnings per share (EPS) also rising.

“The combined product and technology offer of Faurecia and Clarion and our complementary geographic presence and customer portfolios would create significant value for all stakeholders,” Faurecia CEO Patrick Koller said in a statement.

The French company also plans to set up a new business division headquartered in Japan, named Faurecia Clarion Electronics Systems, which would employ almost 9,200 people and have revenue of more than 2 billion euros by 2022.

Reporting by Sudip Kar-Gupta; Editing by David Goodman