German Manager Magazin: Hella takeover: What auto supplier Faurecia is planning to do with Hella from Lippstadt001035

An era is ending for the car headlight specialist Hella. After almost 100 years in family ownership, the company is based in the Westphalian town of Lippstadt sold to the French auto supplier Faurecia for up to 6.8 billion euros. The 60 or so members of the Hueck / Röpke founding family gave the Nanterre-based company the bid for their share package of 60 percent. “Their responsibility for the company requires the family to hand over the baton for management and control early, safely and in an orderly manner,” said Jürgen Behrend, the family representative on the shareholders’ committee.

Faurecia stated that with the takeover of Hella, the aim was to “create number seven among the global automotive suppliers with a state-of-the-art technology portfolio that covers all of the industry’s megatrends”. In Europe, it is one of the five largest suppliers.

Faurecia attacks Bosch, Hella should benefit in China and Japan

The French hope Hella will give them better access to German car manufacturers, while Faurecia hopes to gain market share from competitors like Bosch. Hella, in turn, should gain a foothold with manufacturers in China and Japan, with whom Faurecia is doing well. Together, Faurecia and Hella have sales of 23 billion euros and an operating result (Ebitda) of 3.2 billion euros. By 2025, sales are expected to rise to more than 33 billion euros, with an Ebitda of five billion.

At the same time, Faurecia boss Patrick Koller wants to reduce dependence on the combustion engine. Components for gasoline and diesel cars currently make up a quarter of sales; in four years it should be less than ten percent. “Together we will have a decisive lead when it comes to benefiting from the strategic drivers of the transformation in the automotive industry,” said Koller.

A group with 150,000 employees – “long-term commitments for Hella locations”

In addition to the 114,000 Faurecia employees, there are 36,000 from Hella. Hella alone achieved a sales increase of 13 percent to 6.5 billion euros in 2020/21 (as of the end of May). Adjusted operating profit (EBIT) recovered to 510 (2019/20: 227) million euros.

The merger is expected to bring about EUR 200 million in savings within four years. The French emphasized that they were adhering to collective agreements and works agreements. “We have secured long-term commitments for the locations and investments in the future fields”, declared the family lines Hueck and Röpke.

Three Faurecia divisions are to be managed from Lippstadt, Hella managers are to be given important positions at Faurecia.

The Hella founding family, the Hueck, becomes the largest single shareholder in Faurecia – ahead of the Agnellis

The family will receive 3.4 billion euros in cash for their shares as well as Faurecia shares worth almost 600 million euros. With nine percent, it rises to become the largest shareholder in the French company, ahead of the Italian Agnellis. The French car manufacturer PSA Peugeot had given its Faurecia shares to the shareholders in the course of the merger with the Italian-American manufacturer Fiat Chrysler to Stellantis. The previous Hella owners have also promised to take part in the EUR 800 million capital increase with which Faurecia intends to partially refinance the takeover.

In the spring, the Hella shareholders commissioned the Rothschild investment bank to look for a buyer. In 1923, the Hueck family took over the majority of what was then Westfälische Metall-Industrie (WMI), which manufactured petroleum lights and horns. “During this time, Hella has grown into a dimension in which not only leadership but also control through external competence is required,” said Behrend. “The family’s responsibility therefore dictates that they find a safe haven for Hella.”

Second largest takeover in Germany this year

The now 72-year-old was the last family member to hand over operational management of Hella in 2017 – after 30 years. The pool contract, in which the family had bundled their shares after the IPO in 2014, actually ran until 2024. But a successor that could have bundled the interests of the family was not in sight.

With a volume of 6.8 billion euros, Hella is the second largest takeover of a German company this year after the merger of the housing giants Vonovia and Deutsche Wohnen. But how many Hella shareholders outside of the family will accept the offer is open. Like the family, Faurecia gives them 60 euros per share and – even before the takeover – a dividend of 96 cents. The offer is 33 percent above the price at the end of April, when “Manager Magazin” first reported on the sales plans. But on Friday, the Hella shares in the MDax small cap index closed well above it at EUR 63.18.

Investors had expected higher supply

The Bloomberg News Agency had last reported the headlight specialist from Lippstadt in North Rhine-Westphalia could be valued at up to eight billion euros. As a result, the share rose to a record high of EUR 68.72. However, since the actual purchase price offered by Faurecia is significantly lower at EUR 60 per share, the Hella share is likely to come under pressure initially.

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