India's Motherson Sumi in early-stage merger talks with Leoni -sources

Sumitomo Electric Industries

14/12/2018 09:15

* Financing for possible deal still needs working out -
source
    * Deal expected to be worth more than 1 bln euros - source
    * Shares in Leoni jump; Motherson Sumi rises as much as 10.8
pct  

 (Adds Motherson comments; stock movement)
    By Arno Schuetze and Sumeet Chatterjee
    FRANKFURT/HONG KONG, Dec 14 (Reuters) - Indian car wiring
maker Motherson Sumi Systems Ltd  MOSS.NS  is in early talks
with German peer Leoni AG  LEOGn.DE  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  5802.T , 
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 people said. 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  DAIGn.DE  and Volkswagen AG  VOWG_p.DE ,
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 earnings.
    ($1 = 0.8806 euros)

 (Additional reporting by Aditi Shah and Alexander Hübner;
Editing by Maria Sheahan, Kirsten Donovan and Himani Sarkar)
 ((arno.schuetze@thomsonreuters.com; +49.69.7565.1197; Reuters
Messaging: arno.schuetze.reuters.com@reuters.net))