The acquisition will help Magna achieve about $100 million in annual cost savings by 2024, according to the statement.
Stockholm-based Veoneer -- which spun off from longtime safety equipment supplier Autoliv Inc. in 2018 -- will be combined with Magna's existing advanced driver assistance systems business.
The deal has been approved by the boards of both companies and is expected to close by the end of this year.
Veoneer shares lost more than half their value after the split with Autoliv as orders slumped and the company racked up losses. Automakers and their large suppliers have struggled to commercialize autonomous-driving technology due to high costs and engineering challenges.
“This is a very good outcome for VNE shareholders,” Joseph Spak, an analyst at RBC Capital Markets, said in a note. The deal gives Veoneer more resources to develop its suite of driver-assistance systems and it now has a big customer for its vehicle perception and software platform, Spak wrote.
Shares of Magna fell 4.75 percent to close at $80.93 on Friday.
Magna ranks No. 4 on the Automotive News list of the top 100 global suppliers with worldwide sales to automakers of $32.6 billion in 2020.
Bloomberg and Automotive News contributed to this report.