Magna International Inc. and Veoneer have entered into a definitive merger agreement under which Magna will acquire Veoneer. Under the agreement, Magna will receive all of the issued and outstanding shares of Veoneer for $31.25 per share in cash, representing an equity value of $3.8 billion and an enterprise value of $3.3 billion, inclusive of Veoneer’s cash, net of debt and other debt-like items as of March 31st, 2021.
According to Magna, the acquisition will strengthen the company’s global ADAS business, particularly in new markets like Asia. Magna expects to operate Veoneer’s Arriver sensor perception and drive policy software platform as an independent business unit, consistent with Veoneer’s current practice. In addition, Magna will acquire Veoneer’s restraint control systems. Other key areas of focus include cameras, radar, LiDARs, and domain controllers.
“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,” explained Swamy Kotagiri, CEO of Magna. “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.”
Following the transaction’s closing, Veoneer will be integrated into Magna’s electronics operating unit. According to the announcement, the combined business will build upon relationships with both organizations’ automotive customers, suppliers, and technology partners.
“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, Chairman, President, and CEO of Veoneer. “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.”
Financial Information & Approvals
According to Magna, the company expects to realize annual run-rate synergies of approximately $100 million by 2024 (Magna notes these savings are incremental to Veoneer’s previously announced market adjustment initiatives). The all-cash transaction will allow Magna to maintain an expected adjusted debt to adjusted EBITDA ratio slightly above the high end of Magna’s 1.0 to 1.5 target range at closing.
The transaction has been unanimously approved by the Veoneer and Magna boards of directors, and Veoneer’s board of directors unanimously recommends that Veoneer stockholders approve the proposed merger and merger agreement. In addition, Veoneer stockholders AMF, Cevian, AP4, and Alecta, which collectively represent approximately 40 percent of Veoneer’s outstanding shares of common stock, have either entered into support agreements with Magna or provided indications of support, pursuant to which they have agreed, among other things and subject to certain conditions, to vote their shares of Veoneer common stock in favor of the transaction. The transaction is expected to close near the end of 2021, subject to the approval of Veoneer’s stockholders, certain regulatory approvals, and other customary closing conditions. The transaction is not subject to any financing conditions.
“We have a great deal of respect for Veoneer’s team around the world and their culture of innovation and creativity,” Kotagiri added. “We look forward to welcoming Veoneer’s employees into our global Magna family and are confident that together we will be able to achieve great results and move faster to address the growing ADAS market.”