INSUBCONTINENT EXCLUSIVE:
FRANKFURT/HONG KONG: Indian car wiring maker Motherson Sumi Systems Ltd is in early talks with German peer Leoni AG over a possible merger
of the pair, two people close to the matter said.
The car industry and its suppliers, facing a regulatory crackdown on diesel emissions and
a slump in China, have issued a slew of profit warnings in recent months and companies are shaking up their businesses in order to
adapt.
Motherson Sumi has snapped up a number of companies in recent years, adding to its range of automotive interior products including
rearview mirrors, wiring harnesses and rubber and plastic components.
The company, a joint venture between India's Samvardhana Motherson
Group and Japan's Sumitomo Wiring Systems, has been scouting for a sizeable acquisition target in Europe with the help of an investment
bank.
Any deal with Leoni could be worth more than 1 billion euros ($1.1 billion) but financing still needs to be worked out, one of the
The exact deal structure was still unclear, and deliberations may not succeed, the sources added.
An acquisition of Leoni would add to
Motherson Sumi's 180 facilities across 37 countries and bolster overseas sales.
Motherson Sumi, which counts several global automakers
including Daimler AG and Volkswagen AG, as clients, informed the Indian stock exchange on Friday that it keeps "examining and evaluating"
business opportunities globally and it would make necessary disclosures when needed.
Leoni declined to comment.
Shares in Leoni, which has a
market cap of $7.1 billion, ended up 18 percent on Thursday in their biggest one-day gain in nearly a decade
The stock has slumped more than 50 percent this year as demand stagnated, with Leoni citing rising global trade tensions and stricter
emissions rules for slowing business.
Shares in Motherson Sumi rose as much as 10.8 percent on Friday, and was trading up 2.3 percent by
0844 GMT.
Motherson Sumi most recently acquired Reydel Automotive, which manufactures door panels and cockpit modules, for about $200
million to help meet its target of not having any component, customer or country contribute more than 15 percent to its business by
2020.
Parent company Samvardhana Motherson is one of the world's fastest growing specialised automotive component manufacturers, recording
a turnover of $10.5 billion in fiscal 2017/18, according to Motherson Sumi's latest annual report.
Cable and wiring system specialist
Leoni brought in Aldo Kamper as its chief executive in September
After cutting its 2018 targets, the company is undertaking a comprehensive restructuring programme.
Analysts at Berenberg said in August
that although Leoni had a large order backlog, it needed to improve its cost structure, with additional expenses likely to hurt 2019
