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MOSL: MOTHERSON SUMI (Buy)-SMRPBV to acquire Reydel Auto for USD201m (2x EBITDA)-Complements SMP

Motherson Sumi: SMRPBV to acquire Reydel Auto for USD201m (2x EBITDA); Complements SMP, strengthens presence in plastic parts business

(MSS IN, Mkt Cap USD10.5b, CMP INR324, TP INR437, 35% Upside, Buy)

 

Motherson Sumi’s (MSS) 51% subsidiary SMRPBV has entered into an arrangement for the acquisition of Europe-based Reydel Automotive. Reydel is engaged in the plastic parts business, and thus, should help MSS’ Samvardhana Motherson Peguform (SMP) business to consolidate its position in this segment. Key highlights:

•  SMRPBV has proposed to acquire a 100% stake in Reydel Automotive for USD201m. This acquisition is structured under a Lockbox arrangement with effect from 1st January 2017.
• This stake would be bought from Cerberus Capital, a private equity player. Reydel was carved out from Visteon and acquired by Cerberus in 2014.
• Acquisition price of equity valued at USD201m implies EV/EBITDA of 2x CY17.
• Reydel is a global supplier of instrument panels, door panels, console modules, decorative parts and cockpit modules, with presence across the EU, South America and Asia. It has 20 manufacturing facilities, with presence across 16 countries and ~5,650 employees.
• For CY17, Reydel had revenues of USD1b, with an EBITDA margin of 6.5% and an EBIT margin of 4.6%. It had net cash of ~USD63m as of December 2017.
• Key customers are PSA, Renault, RSM, SsangYong/M&M, VW and GM. Post this acquisition, no customer for MSS would account for more than 15% of revenues.
• This acquisition is highly synergistic with SMP’s business, with complementary portfolio of products, customers and capabilities. Reydel only does interior parts, whereas SMP also has a sizeable presence in exterior parts. It adds manufacturing footprint for MSS in countries like the Philippines, Indonesia, Croatia and Morocco.