KKR Is Holding Talks to Buy Fiat's Magneti Marelli Unit

(Bloomberg) -- Private equity firm KKR & Co. is in talks to acquire Fiat Chrysler Automobiles NV’s car-parts business Magneti Marelli to add to its portfolio of automotive companies, according to people familiar with the matter.

The buyout firm would likely combine the operation with its Japanese parts maker Calsonic Kansei if they reach an agreement, said the people, who asked not to be identified because the discussions are private. Negotiations are ongoing and could still fall apart, and Fiat may yet opt for a spinoff of Magneti Marelli, they said.

A verdict on Magneti Marelli will be one of the first major decisions Fiat Chrysler Chief Executive Officer Mike Manley makes after taking over the job on July 21 from Sergio Marchionne, who died last month.

Fiat has fielded interest for the car-parts business -- which may be valued at as much as 6 billion euros ($7 billion) including debt -- from potential buyers including an unnamed Asian parts supplier as well as buyout firms Apollo Global Management and Bain Capital, people familiar with the matter said this month. The Italian-American carmaker said at the time that it’s sticking to plans to spin off the business for now, while pledging to evaluate bona fide proposals for alternative transactions.

A spokesman for Fiat reiterated those comments on Wednesday, saying the company was pursuing a separation of the Magneti Marelli business while assessing any other proposals that “may be in the best interest of the company.” The carmaker declined to comment on the KKR talks, which were reported earlier by the Wall Street Journal. The buyout firm also declined to comment.

Fiat Chrysler announced in April that it intended to distribute Magneti Marelli to shareholders by the end of the year, after earlier rebuffing approaches from several suitors. Bloomberg News reported in March that Bain was among the parties expressing interest. Still, at the five-year strategy presentation in June, Marchionne said the carmaker remained open to the unit’s sale if a buyer arrived with a big enough “check.”

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