DETROIT -- German auto supplier Continental AG early Monday announced plans to acquire the automotive unit of Motorola Inc. for $1 billion.
The transaction includes Motorola's controls, sensor, interior electronics and telematics businesses. The acquired business will be integrated into Continental's Automotive Systems unit. The deal is set to close sometime before June 30 is subject to customary closing and regulatory conditions.
Motorola put the automotive business on the sales block in September 2005.
Continental, in a statement, said the deal will:
- Significantly increase its product portfolio and R&D capabilities in body and sensor electronics as well as powertrain and chassis controls.
- Double overall sales of Continental's Automotive Systems division in North America.
- Add telematics to its product mix.
Continental has said it aims to spend up to 4 billion euros ($4.85 billion) for acquisitions and specifically singled out targets in North America and Asia for its electronics business.
Continental's CEO, Manfred Wennemer, said Monday that he does not expect "a lot of cost synergies" from the acquisition of Motorola's global automotive electronics business.
"This is not a story of synergies, but rather adding business," he said.
The acquisition is expected to double the division's overall sales in North America. Major customers for the business include General Motors, Ford, DaimlerChrysler, BMW and Cummins. Motorola's global automotive electronics business employed roughly 4,500 workers in 2005, most of them in North America.
"This strategic move will further strengthen our position as a safety and systems supplier to the automotive industry and will give us a real push forward in automotive electronics," Wennemer said in a statement.
"Motorola's automotive electronics business is a perfect fit with our strategy of providing sophisticated safety systems to our customers. They are a premier telematics supplier and possess profound experience in this field."
Metzler Bank analyst Juergen Pieper tentatively approved of the strategic expansion into telematics, but cautioned that while the purchase price seemed reasonable, the lack of earnings figures for Motorola's business complicated a more comprehensive analysis.
"I like the basic idea of strengthening a growth business like Continental Automotive Systems. The whole field of navigation as a product enjoys growth rates that are clearly above 10 percent worldwide," he said, estimating that Motorola's automotive electronics activities had an operating margin around 10 percent.
Continental, based in Hanover, Germany, ranked No. 14 on the Automotive News list of 100 largest global auto suppliers with global automotive sales of $9.3 billion in 2004.
Motorola, based in Schaumburg, Ill., has been involved in the auto business since inventing the first commercially successful car radio in 1930.
Reuters contributed to this report.
You may e-mail Philip Nussel at [email protected]