Inside a Motherson Sumi Systems Ltd. auto parts factory. (Photographer: Brent Lewin/Bloomberg)

Motherson Sumi Jumps On Report Of Merger Talks With German Peer

Shares of Motherson Sumi Systems Ltd. surged as much as 10 percent on a report that India’s second-largest auto parts maker is in early talks for merger with with German peer Leoni.

Leoni, which makes and sells electric cables, wires and custom cable wiring systems, too, jumped 18 percent on German stock exchanges after the report.

Motherson Sumi Jumps On Report Of Merger Talks With German Peer

An acquisition of Leoni AG, expected to be worth more than 1 billion euros, would add to Motherson Sumi’s 180 facilities across 37 countries, Reuters first reported quoting people close to the matter.

In a reply to a stock exchange query, Motherson said the company is not aware of any such source of information for such an announcement. “The company keeps examining and evaluating various business opportunities available globally,” it told the exchanges.

To be sure, Germany is one of the biggest markets for Leoni and Motherson Sumi. It contributed 27.8 percent to Leoni’s revenue in calendar year 2017 and 27.4 percent to Motherson Sumi’s in the financial year 2017-18, Bloomberg estimates showed.

Also, profitability of Motherson Sumi is expected to be much higher than Leoni, according to consensus estimates of analysts tracked by Bloomberg.

The two car wiring makers also have three common clients—Volkswagen, Daimler and BMW groups—of the top five by revenue contribution, according to Bloomberg data.

Leoni, which operates in Europe, Asia and the U.S., is in the process to set up six new production sites in Mexico, Serbia and Tunisia. Motherson Sumi also plans to expand in America, Europe and India.

Also read: Why The Gap Between Estimates And Reality Is At Its Widest For Motherson Sumi