Fiat agrees to sell parts unit to KKR’s Calsonic Kansei

Fiat Chrysler agreed to sell its car-parts unit, Magneti Marelli, to KKR’s Calsonic Kansei in the first major deal for the ItalianAmerican carmaker under new chief executive Mike Manley.

The transaction, valued at 6.2 billion euros ($9.3 billion), will create Japan-based Magneti Marelli CK Holdings, according to a statement Monday. Beda Bolzenius, chief executive of the acquirer, will lead the combined entity, which will supply components to Fiat Chrysler through a multi-year deal. The Italian business will remain in Milan, according to a statement Monday.

Fiat Chrysler shares rose as much as 7.2 per cent in Milan after a delayed opening.

The sale price is more than one billion euros higher than analysts’ average valuation for the business, Mediobanca said in a note.

The deal creates an auto-parts maker with more than $22 billion in annual revenue and about 65,000 workers from Tokyo to Milan. The sale is a major milestone for Manley, who took over Fiat Chrysler days before the death of his predecessor Sergio Marchionne in July.

It’s also the first M&A transaction overseen by chairman John Elkann since his so-called deal “maestro” passed away.

Fiat will keep Marelli’s plastics division, which is mostly a captive business and generated about 700 million euros in revenue last year, according to people familiar with the matter.

The announced 6.2-billion-euro transaction value of the all-cash deal is based on the entire equity value of the old Marelli, the people said, asking not to be named discussing non-public details. An undisclosed amount of debt and working capital is included in the transaction, but isn’t part of the equity calculation, they said.

Marchionne, who had initially favoured separating the business by distributing shares to investors, had said Fiat was open to changing its mind for a “big check.”

Fiat Chrysler opted for a sale of Magneti Marelli instead of listing on the Milan stock exchange after market conditions deteriorated amid global trade tensions and political uncertainty in Italy, as well as profit warnings from automakers and suppliers.