Automotive suppliers are increasingly looking to Canada for acquisitions.
Attracted by the cheaper Canadian dollar and lower costs, suppliers have bought or announced the purchase of 15 auto supply companies through October. That compares with five such deals for all of 1997, according to the investment company Bowles Hollowell Conner & Co. of Charlotte, N.C.
The buyers, primarily from the United States and Europe, have targeted stamping, aftermarket, injection molding and other categories under consolidation. The biggest of those deals disclosed was $176 million, but most were below $54 million.
Deal making for Canadian suppliers picked up earlier this year as the value of the Canadian dollar sank amid economic turmoil around the globe.
'It's due primarily to the exchange-rate devaluation,' said David Strickler, head of automotive research for Bowles Hollowell. 'Buyers can buy assets at cheaper prices.'
Most of the buyers are U.S.-based original equipment suppliers. But they include the Canadian giant Magna International Inc. as well as buyers from Italy and Germany. One buyer, Chase Capital Partners, is an investment firm. Most, like Noble International Ltd. of Bloomfield Hills, Mich., are strategic buyers - those seeking an acquisition that will enhance their existing operations.
Robert Skandalaris, CEO of Noble, bought one Canadian supplier and is closing on a second. In July, he announced plans to buy Triam Plastics of Stoney Creek, Ontario. Triam Plastics had been a division of Triam Automotive Inc., a Concord, Ontario, company acquired earlier by Magna, which is based in Aurora, Ontario.
In early October, he closed on Centrifugal Coaters Inc., an Oakville, Ontario, company, to enhance his trim-part coating capability. Skandalaris said he is hunting for still more Canadian acquisitions.
'They were not solely opportunistic buys,' he said. 'We felt they were strategic and that was most important.'
The deals were not without financial advantage. From December 1997, the Canadian dollar depreciated from $1.37 to the U.S. dollar to a low of $1.58 in August. It has rebounded slightly since.
Moreover, the purchase price as a multiple to earnings is lower with Canadian companies, he said. Fewer prospective Canadian buyers, fewer customers and differences in the financial system contribute to the difference, Skandalaris said.
Another buyer was the team of Chase Capital Partners and F. Alan Smith, the former General Motors vice chairman. Their Advanced Accessory Systems LLC, based in Sterling Heights, Mich., acquired Transfo-Rakzs of Bromptonville, Quebec, a manufacturer of rear-hitch bicycle, ski and snowboard carriers.
The largest acquiror was Southfield, Mich.-based Federal-Mogul Corp., which announced in October that it would buy Tri-Way Machine Ltd. of Windsor, Ontario. Tri-Way, a manufacturer of machines and machining systems, will give Federal-Mogul the ability to machine connecting rods, according to Bowles Hollowell.