Motherson Sumi in early stage merger talks with Leoni -sources

Sumitomo Electric Industries

13/12/2018 16:39

* Financing for possible deal still needs working out -
source
    * Deal expected to be worth more than 1 bln euros - source
    * Shares in Leoni jump 

 (Adds further details of talks, background)
    By Arno Schuetze and Sumeet Chatterjee
    FRANKFURT/HONG KONG, Dec 13 (Reuters) - Car wiring maker
Motherson Sumi  MOSS.NS  is in early-stage talks with German
peer Leoni  LEOGn.DE  over a possible combination of the two
companies, 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, which is a joint venture between India's
Samvardhana Motherson Group and Japan's Sumitomo Wiring Systems
 5802.T , 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 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 ($1.14
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 result in any deal at all, 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, had no immediate comment. Leoni declined to comment.
    Shares in Leoni, which has a market cap of $7.1 billion,
closed 18 percent higher for their biggest one-day gain in
nearly 10 years. The share price had dropped almost 60 percent
this year as demand stagnated, with the company citing rising
global trade tensions and stricter emissions rules for slowing
business.   
    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 new 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 costs likely to negatively affect 2019 earnings.
($1 = 0.8806 euros)

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