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Shanghai Electric among Chinese firms targeting Fiat's Comau - sources

Thu 6th October, 2016 11:24am
* Sinomach, Simee also interested in Comau - source 
    * FCA focusing first on deal for Magneti Marelli - sources 
    * Auto parts sales could help FCA cut debt, fund investment 
 
    By Pamela Barbaglia, Agnieszka Flak  and Arno Schuetze 
    LONDON/MILAN/FRANKFURT, Oct 6 (Reuters) - Chinese firms 
including Shanghai Electric  601727.SS  have approached Fiat 
Chrysler Automobiles (FCA)  FCHA.MI  to express an interest in 
buying its Comau robotics business, sources familiar with the 
matter told Reuters. 
    Any deal would follow a wave of European acquisitions by 
Chinese firms as they seek global scale and could help FCA pay 
down debt as well as fund an expensive investment plan. 
    Chinese conglomerate Sinomach  600335.SS  and Shanghai 
Institute of Mechanical and Electrical Engineering (Simee) have 
also approached FCA  FCAU.N  over a possible bid for Comau, 
hoping to persuade FCA boss Sergio Marchionne to sell the 
Turin-based specialist in welding robots, one of the sources 
said. 
    But FCA is currently focused on talks over a potential sale 
or partnership for its Magneti Marelli auto parts maker with 
South Korea's Samsung Electronics  005930.KS  and is in no rush 
to consider options for Comau, a profitable unit with revenues 
of just under 2 billion euros ($2.3 billion), the sources added. 
    FCA declined to comment, while Shanghai Electric, Sinomach 
and Simee were not immediately available to comment due to a 
national holiday in China. 
    The world's seventh-largest carmaker has one of the highest 
debt piles in the industry and needs cash to fund an ambitious 
48 billion euro investment plan, especially after Marchionne's 
proposal to tie up with U.S. rival General Motors  GM.N  was 
repeatedly rebuffed.  
    FCA chairman John Elkann said on Sept. 3 that FCA was in 
talks with several parties, including Samsung, and reviewing 
options for Magneti Marelli.  urn:newsml:reuters.com:*:nL8N1BF06R 
    A deal could be worth up to 4 billion euros depending 
whether Samsung buys all or part of Magneti Marelli, which makes 
components for lighting, engines, electronics, suspension and 
exhausts, among other items, the sources said. 
    If successful, the sale of Magneti Marelli could pave the 
way to other disposals within FCA's auto parts division, which 
also includes Comau and castings firm Teksid, the sources said. 
    Discussions between Samsung and FCA have been going on since 
the start of the summer but the two parties remain far from an 
agreement, the sources said. In fact, they have yet to hire 
banks to help negotiate the terms of a deal, they added. 
    Samsung is only interested in certain parts of Magneti 
Marelli and the two companies may initially set up a partnership 
that could later evolve into a sale, they said. 
    A Samsung spokesman declined to comment. 
    Comau is Fiat's second biggest components business, with 
adjusted operating profit of 72 million euros in 2015. 
    The unit, which employs 12,600 people in 17 countries, has 
also drawn interest from private equity funds, the sources said, 
cautioning no deal was certain. 
    Comau, led by chief executive Mauro Fenzi, supplies process 
automation products to several FCA brands, including Chrysler, 
and its operations are intertwined with the rest of the group, 
making it hard to hive it off, the sources said. 
    A partnership with one of the Chinese suitors is seen as a 
better option for FCA, one source said, although the Chinese 
bidders have mainly shown interest in a full acquisition. 
     
    TAKEOVER FEVER 
    Meanwhile, some private equity funds including U.S. buyout 
firm Marlin Equity Partners have set their sights on Teksid, the 
smallest of FCA's auto parts units with 2015 revenues of 631 
million euros and an adjusted operating profit of 2 million 
euros, one of the sources said. 
    But FCA is keeping buyout funds at arm's lengths, the 
sources said, and there are no talks underway. 
    A spokesman at Marlin Equity Partners was not immediately 
available for comment. 
    A sale of any of the units could help FCA pay off some debt 
at a time when it is highly exposed to a peaking U.S. auto 
market and its five-year investment plan is plagued by product 
delays. 
    Chinese firms and other international automotive players are 
better positioned to buy FCA's auto parts units than private 
equity funds since Marchionne is wary of selling assets to 
financial investors and recently rebuffed bids from heavyweight 
funds for Magneti Marelli, the sources said. 
    Aviation Industry of China  SASADY.UL  (Avic) could also 
make a move for FCA's units, particularly Comau, the sources 
said, as it seeks access to proprietary technology. Avic 
representatives could not be immediately reached for comment. 
    Chinese firms have shown growing interest in European 
automotive assets as they look to boost their global presence, 
with Chinese household appliances company Midea Group recently 
buying industrial robot maker Kuka  KU2G.DE .  urn:newsml:reuters.com:*:nL8N1AY16H 
    China's voracious appetite for overseas acquisitions has 
propelled Asia to the forefront of global deal-making for the 
first time, with investment bankers hoping Chinese buyers will 
continue to support an otherwise slowing M&A market. 
    Last year, state-backed ChemChina bought a majority of 
Italy's Pirelli, the world's fifth-largest tyre maker. It then 
bought Swiss seeds and pesticides group Syngenta  SYNN.S  for 
$43 billion in February, the largest Chinese deal this year. 
    ($1 = 0.8924 euros) 
 
 (Addintional reporting by Vincent Lee, Norihiko Shirouzu and 
Sue-Lin Wong; Editing by Mark Potter) 
 ((pamela.barbaglia@thomsonreuters.com;  +442075427723; Reuters 
Messaging: pamela.barbaglia.thomsonreuters.com@reuters.net)) 
 
Keywords: FIATCHRYSLER M&A/COMAU
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