Valeo Buys Out Siemens From EV-Components Venture in $317 Million Deal

Tara Patel and William Wilkes, Bloomberg News

An electric car stencil symbol sits on a parking space at the electric vehicle charging site operated by Enercity AG in Hanover, Germany, on Thursday, July 23, 2020. Europe’s largest car market is rolling out a nationwide electric car charging infrastructure by 2030 in an effort to rein in transport emissions. , Bloomberg

(Bloomberg) -- Valeo SA has agreed to acquire Siemens AG’s stake in their five-year-old electric-car components venture to bolster its position in the rapidly expanding EV market.

The French company will acquire the 50% holding for 277 million euros ($317 million), according to a statement Wednesday, in a deal that will raise its net debt by 741 million euros.

“Strategically, this is a very important step for Valeo,” Chief Executive Officer Christophe Perillat said on a call with journalists. “The terms of the deal are good and it comes at the right time.”

The unit is expected to break even this year on a pre-tax cash flow basis and improve revenue and profit margins in the coming years, Valeo said.

Auto-parts makers are overhauling their operations to keep pace with an accelerating shift to battery-powered cars. Faurecia SA this week unveiled new financial targets and branding after taking control of rival Hella Gmbh & Co. in a bid to sharpen its own EV offerings.

Valeo and Siemens joined forces on Valeo Siemens eAutomotive GmbH in 2016 to make e-motors, axles and powertrain electronics for plug-in hybrids and fully electric vehicles.

On Wednesday, Perillat said the market “is growing very strongly” and predicted annualized 17.5% growth to 92 billion euros in 2030.

Carmakers like Stellantis NV and Volkswagen AG are rolling out new EV models and production plans, but it’s unclear to what extent major parts like motors will be made in house.

Perillat, who took the helm at the start of the year, reiterated a previous forecast put forth by the company that 40% of the overall market will be outsourced to automotive suppliers.

By the end of 2022, more than 90 electric and plug-in hybrid models will be fitted with Valeo’s electric powertrain systems, motors, inverters or onboard chargers, it said.

Siemens said the sale of its stake would boost its profits by 200 million euros in its fiscal second quarter and solidify a shift away from equipment to software.

Valeo mapped out a series of ambitious financial targets for the Erlangen, Germany-based unit that will be combined with its own ‘Powertrain Systems’ business. These include:

Pre-tax cash flow of 350 million euros in 2025
Annual sales growth of more than 12% to reach 8.5 billion euros by 2025
EBITDA margin to widen from 5.8% in 2021 to more than 8% in 2022 and more than 11% in 2025

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