Automotive Purchase of Structural Components for Passenger Cars Division of Metalsa
Martinrea International Inc., a diversified and global automotive supplier announced it reached an agreement to acquire the Structural Components for Passenger Cars operations of Metalsa S.A. de C.V. The purchase price for the transaction was expected to be approximately USD $19.5 million in cash, inclusive of working capital and on a debt free basis.
The Structural Components for Passenger Cars operations to be acquired by Martinrea specialize in a wide variety of metal forming technologies, including chassis components such as cradles, control arms, and trailing arms; body components such as side rails, A and B pillars, door beams, wheel housings and bumpers; and several other components such as fuel tanks. The operations to be acquired cover six plants in Germany, the United States, Mexico, South Africa and two in China, with approximately 2,000 employees, as well as a leading edge technical and engineering centre in Germany. Martinrea indicated the assets to be acquired are expected to generate sales in 2020 of approximately CDN $400 million. The assets to be acquired are not generating positive cash flow at the present time, but adjusted EBITDA for the business to be acquired is expected to be approximately break even in 2020 after closing and have a positive adjusted EBITDA of approximately CDN $30 million in 2021 and to be accretive to earnings. The Company further indicated the largest customers of the business are Daimler, BMW and Volkswagen.
The assets to be acquired will include a large facility in Bergneustadt, Germany, with a technical centre which is the base for European production and engineering for the group, producing body, safety and suspension structures; this facility is approximately 70 km from Martinrea’s aluminum operations in Meschede Germany, creating some opportunity for synergies; a plant in San Luis Potosi, Mexico, producing body, chassis and suspension structures, as well as door beams and steel fuel tanks; a relatively new start-up facility in Tuscaloosa, Alabama, which produces safety structures, front ends and some service parts and contract services; two facilities in China, one near Beijing and one in Shenyang, that presently produce body, safety and suspension structures for Daimler and BMW, respectively; and a facility in South Africa that produces body structures for Daimler. Martinrea’s present modern stamping and welding business is located in North America, and this acquisition will give the Company a broader footprint in Europe, Africa and China, as well as an increased presence in the Lightweight Structures area with European-based customers such as Daimler and BMW.
Pat D’Eramo, Martinrea’s President and CEO, stated: “We are very pleased to announce the pending acquisition to our company and to our Lightweight Structures commercial group. These locations align with our current base and will give us a broader global footprint expanding our product offerings and manufacturing capabilities. We will continue to increase our collaborative efforts with key customers such as Daimler and BMW. This acquisition will strengthen our engineering presence in Europe. It will also give us a very strong engineering presence in Germany for European based customers, which can be combined with our aluminum expertise in Meschede to provide more advanced lightweight solutions to our global customers. The Metalsa locations have some great processes and leading edge technologies in joining multi-materials further promoting our lightweighting strategy, including hot stamping and paint, as well as composite capabilities. We are excited to welcome a new group of creative and motivated team members into the Martinrea family to continue to build a great future together.”
Fred Di Tosto, Martinrea’s CFO, stated: “Not only does this enhance our footprint and capability, but we believe the acquisition will be accretive to our earnings and other metrics over time. The assets to be acquired require some restructuring, but that has been factored into the purchase price. Obviously, our sales will be increased in 2020 and beyond, so we anticipate having total sales in excess of $4 billion in 2020. While the assets to be acquired are not expected to generate positive adjusted operating income in 2020 after closing, we don’t expect it to be negative either. We will improve the operations over time, and we believe that we will see good cash flow and earnings from the assets commencing in 2021. On the Capex front, much of the capital expenditures in the Metalsa assets are for program capital. Even with the acquisition, Capex for Martinrea is expected to be generally flat for next year compared to 2019, and we continue to see 2020 to be a good year from a cash flow and free cash flow perspective.”
Rob Wildeboer, Martinrea’s Executive Chairman, stated: “We have had very good discussions with the Metalsa team, who we have always respected as competitors in this space. Now that they are exiting the Structural Components for Passenger Cars business to focus on frames, we look forward to them being a good customer of ours going forward. They have sought to bring a vibrant corporate culture to their workplace, and we believe our approaches align nicely. The synergy between our two companies is very good from our approaches to culture and sustainability. We will take very good care of their people. That fit was critical to negotiating this deal. For our shareholders, we aim to be the leading lightweighting company in this business, and this transaction strengthens us in this respect.”