Magna (MGA) to Rev Up ADAS Business With $1.5B Buyout Deal

Magna International MGA inked a deal to acquire Veoneer Active Safety business from SSW Partners in a bid to fortify its Advanced Driver Assistance Systems (ADAS) business. This all-cash deal is valued at more than $1.5 billion. Subject to regulatory approvals and satisfactory conditions, the transaction is scheduled to be closed by mid-2023.

The acquisition is in sync with Magna’s Go-Forward strategy, which focuses on strengthening investments in high-growth areas. The deal builds on Magna’s ADAS business strength and seeks to enhance its portfolio with the addition of complementary products, thereby positioning the company to become the leading full-service ADAS provider. The acquisition would add significant engineering and software resources along with broadening the company’s customer base and geographical foothold.

Notably, Veoneer Active Safety 2022 sales are envisioned at around $1.1 billion and are expected to rise around $1.9 billion by 2024. In combination with Magna, the business is expected to witness pro-forma ADAS sales of around $1.8 billion in 2022 and $3 billion in 2024.MGA’s sharp focus on augmenting ADAS technology offers ample growth visibility.

Magna has a long-term expected EPS growth rate of 15.7%. The company is actively focusing on innovation and technology development along with program launches across its business segments and stands to benefit from key emerging trends, including electrification and autonomous driving. A deep focus on its portfolio of e-powertrain products and a strong competitive position in battery enclosures augur well. Magna’s electrification portfolio includes EtelligentEco, EtelligentForce and EtelligentReach, all of which are aiding top-line growth. The Zacks Consensus Estimate for Magna’s 2023 sales and earnings implies year-over-year growth of 4.2% and 33.1%, respectively.

Magna currently carries a Zacks Rank #3 (Hold). A few better-ranked players in the same industry include CarParts.com PRTS, China Automotive Systems CAAS and Garrett Motion Inc. GTX.

Based in Torrance, CarParts operates as an online provider of aftermarket auto parts and accessories. The Zacks Consensus Estimate for PRTS’ 2022 earnings and sales implies year-over-year growth of 85% and 13.2%, respectively. The consensus mark for the 2022 bottom line has improved 72.7% over the past 60 days. The company currently carries a Zacks Rank #1 (Strong Buy) and has a Growth Score of B.

China Automotive Systems is a leading supplier of power steering components and systems in China. The Zacks Consensus Estimate for CAAS’ 2022 earnings and sales implies year-over-year growth of 72.2% and 8.3%, respectively. The consensus estimate for CAAS’s current-year earnings has been revised 55% upward over the past 60 days. The company currently carries a Zacks Rank #2 (Buy) and has a VGM Score of B.

Switzerland-based Garrett designs, manufactures, and sells turbocharger and electric-boosting technologies. The Zacks Consensus Estimate for GTX’s 2022 earnings and sales implies year-over-year growth of 11.5% and 1%, respectively. The consensus mark for 2022 earnings has been revised upward by 2 cents in the past 60 days. The company currently carries a Zacks Rank #2 and has a VGM Score of A.

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