FRANKFURT -- French supplier Faurecia will acquire a majority stake in German automotive lighting group Hella, trumping rival bidders and creating the world's seventh-largest player.
Faurecia will buy a 60 percent stake in Hella from the founding Hueck family through a mixture of cash and stock, Hella said in a statement on Saturday. The Hueck family will take up to 9 percent of the combined company.
Faurecia said in a separate statement that the transaction represented an estimated total enterprise value of 6.7 billion euros ($7.90 billion) for 100 percent of Hella.
People familiar with the matter previously told Reuters that Plastic Omnium and Mahle had submitted bids at around 60 euros per share, valuing the target at roughly 7 billion euros. German brakes maker Knorr-Bremse dropped out of the bidding last month.
The deal, expected to close early 2022, is one of the biggest in the European auto parts industry in the past three years.
It will create a company with annual sales of about 23 billion euros -- forecast by Faurecia to exceed 33 billion euros in 2025 -- and some 150,000 employees.
Automated driving services
Faurecia said the combined group will be better placed to sell electric mobility products and automated driving services to the industry
"Together, we will have the critical edge to benefit from the strategic drivers that are transforming the automotive industry," Faurecia CEO Patrick Koller said.
Revenue synergies are expected between 300 million to 400 million euros of sales by 2025, and cash-flow optimizations are expected around 200 million euros per year on average from 2022 to 2025.
Hella said Faurecia had made long-term commitments regarding strategy, financing and corporate governance, as well as on employees' interests. It also said Hella's headquarters in the western German town of Lippstadt would remain a major corporate center.
The family shareholders said Hella had reached a size that required external competence beyond the founding family.
"The family will continue to overlook the further development of this leading European company as shareholders and with one representative on the administrative board," the family added.
Hella traces its roots back to 1899. The company makes lighting and electronic components, as well as radar sensors for driver-assistance systems. The Huecks have controlled Hella since 1923 and took the company public in 2014.
Hella's business making power and battery electronics and radar sensors for advanced driver assistance systems would mesh well with Faurecia's ambitions, Tom Narayan, an analyst at RBC Capital Markets, wrote in a recent report.
In February, Hella completed the sale of its front camera software business to Volkswagen Group as part of what it called "stringent portfolio management," while reaffirming its commitment to automated driving.
"Consolidation is likely for the legacy auto supplier space," Narayan wrote, citing the shift to electric vehicles from internal combustion engines.
Automakers "are increasingly in-sourcing EV components and many suppliers are overexposed to ICE component sales which are being phased out."
Suppliers have suffered from a global semiconductor shortage and supply chain disruptions during the pandemic, which Hella said last month would most likely continue in the current fiscal year.
Despite the shortages, Faurecia recently said it expects worldwide auto production to rebound over the coming years and return to pre-COVID levels.
Bloomberg contributed to this report