Ontario-based Magna (TSX:MG) announced plans Thursday to purchase Getrag, a German supplier of automotive transmissions for companies such as Ford, BMW, Daimler, Renault and Volvo.
Magna says it will pay 1.75 billion euros for Getrag, which has about 13,500 employees and operations in nine countries in Europe, Asia and North America.
The chief executive of Magna says the deal is squarely in line with its strategy of growing its powertrain segment — particularly expanding into the production of transmissions.
"We believe advancement in powertrain is a key enabler to achieving the various targets set out by governments around the world, to drive improved fuel efficiency and lower vehicle emissions," Don Walker told investors and analysts during a conference call.
"Transmissions are highly engineered products with long life cycles, which make them difficult to commoditize, and we believe alternative transition development may lead (original equipment manufacturers) to consider outsourcing more transmissions in the future to technology-leading suppliers, rather than making the incremental investments required."
Magna says Getrag is a leader in high-growth segments of the transmission industry and has significant joint-venture relationships with Ford as well as two Chinese automakers that provide significant potential for growth.
The deal is expected to close near the end of 2015, subject to necessary approvals and adjustments.
Magna says the offer values Getrag at about C$3.45 billion, after accounting for debt and pension liabilities that Magna will assume.
Magna shares briefly hit a new high of $74.50 shortly after the Toronto Stock Exchange opened but gave up early gains to close down $2.54 or 3.52 per cent at $69.68.