Faurecia moves to acquires Hella

Combination will create seventh largest global automotive supplier.

More automotive supplier consolidation is evident with France-based Faurecia’s move to acquire Germany-based supplier Hella.

Faurecia has acquired the 60% stake held by Hella family pool shareholders and now also completed a voluntary public tender offer to buy most of the remaining shares of Hella at an offer price of EUR60 per share. Full regulatory clearances for the deal are expected in early 2022.

The family pool shareholders of Hella will retain a small stake in the listed parent company via a reverse shareholding. A pool representative is also to join Faurecia’s board.

Together with the shareholding of 60% to be acquired from the family pool, Faurecia will hold 79.5% of the shares in Hella upon completion of the takeover offer. It will represent for Faurecia an investment of EUR5.3bn, to be compared to EUR6.7bn for 100% of Hella shares at EUR60 per share, allowing higher financial flexibility for Faurecia.

The two companies are seen as a good fit, with complementary product and customer base spreads.

Faurecia’s access to Chinese, Japanese and US OEMs will create new growth potential for Hella’s business. Further opportunities arise primarily in the areas of electric mobility, automated driving, interiors and lifecycle value management.

Hella will contribute its portfolio in energy management, sensors and actuators, while Faurecia will provide hydrogen storage solutions and stacks systems.

Faurecia will accelerate the multi-pillar business strategy of Hella with a focus not only on automotive original equipment (Lighting and Electronics), but also on additional market segments (Aftermarket, Services and Special Applications). Lippstadt will continue to play a major role and will be the Headquarter of three Business Groups of the combined group: Electronics, Lighting and Lifecyle Value Management. The management and business CEOs of these three BGs will be based in Lippstadt.

Faurecia’s objective is to leverage Hella’s talents that are essential to achieve the combined profitable growth ambition. Senior management roles will be dedicated to Hella executives. An integration committee equally composed by members of the management of both companies will be created to supervise the integration project. Positions will be staffed according to ‘best of class’ principle, Faurecia says.

Electric Mobility (BEV + FCEV)

A major driver in Faurecia’s strategy is for a bigger group able to develop a more comprehensive product and value offer for electric vehicle technologies (HEVs, PHEVs, BEVs and FCEVs), building on Hella’s energy management portfolio, sensors and actuators related to BEVs, as well as Faurecia’s hydrogen system solutions(FCEV) and hybrid systems.

Battery management systems, DCDC converters, onboard charging systems brought by Hella as well as battery pack systems, hydrogen storage systems and stack systems brought by Faurecia are examples of the combined product offer.

Faurecia says ICE sales exposure will decrease from 25% in 2020 to less than 20% at closing and down to c. 10% in 2025.

It is planned that the combined group will also become a major player in electronics and software solutions to accelerate in Advanced Driver Assistance Systems (ADAS) and autonomous vehicle technologies.

In ADAS, the combination of Faurecia Clarion Electronics with Hella Electronics and Software will create a strong synergy supporting the next high-speed and low-speed ADAS convergence. Radars, Electric Power Steering (including fail operational), e-mirrors, 360° views & automated parking solutions are a few examples of the combined product and system offer.

With combined sales of EUR3.7bn in Electronics and Software, the new group will operate 24 production sites and 21 R&D centers.

The ambition for the combined group is to grow sales to c. EUR7bn by 2025.

Seating and interiors

Faurecia's leading position in seating and interiors combined with Hella’s position in interior lighting and both companies’ electronics capabilities will significantly strengthen Faurecia’s ‘Cockpit of the Future’ integrated advanced tech product strategy for interiors. Hella’s HMI Interior solution capabilities, its portfolio of body electronics (access, comfort, seat), sensors and actuators will support value creation through new customer experiences, Faurecia maintains.

The combined group will also create a ‘Lifecycle Value Management’ stream, in line with rising environmental concerns in the industry and among OEM customers. The combination will bring opportunities to build a real lifecycle value offer, including aftermarket, service and repair. Faurecia will be able to enhance the very well established Hella brands. It will also potentially leverage new business in the environment friendly design of products, sourcing sustainable materials and principles of the circular economy.

Major synergies are expected in bringing together the companies’ respective research and development arms. A combined total of some 18,500 engineers and specialists, including 3,000 software engineers, are expected to boost the development of advanced innovation projects in advanced technologies.

Complementary operations

The combination will bring together two companies with established and complementary positions. It will open new sales opportunities for Hella by leveraging Faurecia’s good access to key Chinese and Japanese OEMs. In the other direction, it will benefit Faurecia’s relationship with German premium OEMs, thanks to Hella’s strong position in Germany. Both will benefit from complementary relationships with US-based OEMs.

Cost savings

An initial quantification by Faurecia of financial benefits from the acquisition looks impressive. It is estimated that cost synergies and optimization, in areas including procurement, SG&A and other operating expenses, should generate an over EUR200m EBITDA run-rate. Faurecia plans a P&L impact that should gradually ramp up from 40% in 2023 to 80% in 2024, to reach 100% in 2025. Sales synergies should generate between EUR300m and EUR400m of sales by 2025, capitalizing on Faurecia’s strong footprint in China, Japan and the Americas to sell Hella brand and on Hella’s electronic position with German OEMs to enhance Faurecia’s market share. In addition to these synergies, cash flow optimization by c. €200m per year on average from 2022 to 2025 will be generated mainly through working capital and capex.