Magna Buys Driver-Assist Supplier Veoneer for $3.8 Billion

(Bloomberg) -- Magna International Inc. will acquire Veoneer Inc. for $3.8 billion in cash, bolstering its business supplying advanced driver-assistance systems to automakers.

The Canadian company’s $31.25-a-share offer represents a 57% premium to Veoneer’s closing price on Thursday. The transaction is expected to close toward the end of this year, according to a statement.

Veoneer shares rose slightly above the takeover price Friday morning before paring gains to trade at $31.20 at 3:06 p.m. in New York. Magna fell as much as 7.1%, its biggest intraday drop in more than a year.

Semi-autonomous features like hands-free driving and crash-avoidance technology have become hotly contested battlegrounds as automakers seek to boost prices, best rivals with options that command a premium, and give drivers high-tech bragging rights. In response, global automotive suppliers are increasingly positioning themselves to benefit from the growth in advanced safety features in passenger cars.

“One of the pillars of Magna’s strategy was to be able to create investment in fast-growing areas that are relevant to the car of the future. ADAS is one of them,” Chief Executive Officer Swamy Kotagiri said in an interview with Bloomberg Television on Friday. “You have to look at the long-term sustainable shareholder value, and that’s where we are focusing.”

ADAS, or advanced driver-assist systems, refers to features in cars on the road today like automatic emergency braking or lane-keep assistance.

General Motors Co. said this week it’s introducing its hands-free driving software to more vehicles and adding new features such as automatic lane change capability. Crosstown rival Ford Motor Co. unveiled plans last October to offer its hands-free driving technology, dubbed Blue Cruise, on its F-150 pickup, the top-selling vehicle in the U.S.

“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.

Veoneer was spun off by auto-safety supplier Autoliv Inc. in 2018. The shares lost more than half their value after the split as orders slumped and the company racked up losses.

Magna investors will “struggle with the rationale” of the deal in the short term, Chris McNally, an analyst at Evercore ISI, said in a note, citing possible challenges with integrating certain technology and Veoneer’s recent cash burn. On the plus side, Veoneer’s radar, thermal and driver-monitoring system businesses are “of high-quality and truly complimentary” to Magna’s product offerings.

Magna and Veoneer said the deal has been unanimously approved by their respective boards. Citigroup Inc. served as financial adviser and Sidley Austin LLP provided legal counsel to Magna. Rothschild & Co. and Morgan Stanley advised Veoneer along with Skadden, Arps, Slate, Meagher & Flom LLP.

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