TORONTO -- Magna International Inc., the largest auto supplier in North America, will consider major acquisitions, the company's CEO said.
Acquisitions are gaining momentum among suppliers. For instance, ZF Friedrichshafen AG, a major producer of transmissions, is in talks to acquire TRW Automotive Holdings Corp., which makes steering, safety and electronics systems.
Last week, The Wall Street Journal reported that Lear Corp., a major seat supplier, is completing a deal to buy Eagle Ottawa, a major supplier of auto leather.
Magna, which hasn't made an acquisition of more than $500 million in a decade, is more willing to take on debt to finance significant acquisitions than it was when former chairman Frank Stronach was involved with the company, CEO Don Walker said in an interview in Bloomberg's Toronto offices.
The number of auto suppliers will shrink as car companies push for vendors who can supply fewer global platforms, he said. While Magna would use cash for a small acquisition, it could also take on debt or issue equity if the target was "huge," Walker said.
"We have complete flexibility," he said. "We have good discussions at the board."
The 2008-09 downturn would have been a good time to do deals but the company didn't want to use its cash and with the shares trading so low, a share-backed purchase would have been dilutive.
"We're not in that situation anymore," Walker said.
Stronach, who stepped down as chairman in 2011 as the company switched to a single share-class structure, had shied away from debt in the cyclical auto parts industry. He declined to comment, spokeswoman Michelle Abbott said in an email.
Magna's largest acquisition since 1990 was the $603 million privatization of its public subsidiary Tesma International Inc. of Concord, Ontario, in 2004, according to data compiled by Bloomberg.
The combined value of all of Magna's acquisitions since 1990 in which the terms were disclosed is just $3.3 billion, the data show. What Magna might be interested in acquiring is another question.
The seating business of Johnson Controls Inc. in Milwaukee or a complete takeout of Lear Corp. in suburban Detroit would be the mostly likely targets if Magna was looking to bolster its seating business, Colin Langan, an analyst at UBS Securities said in an interview.