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Samsung Acquires Magna International's EV Battery-pack

Magna International Inc. (NYSE:MGA) is a global automotive supplier and is one of Canada’s largest automobile parts manufacturers in North America, in terms of sales of original equipment parts.

Headquartered in Aurora, Ontario, Canada, Magna’s operating groups include Magna Steyr, Magna Electronics, Magna Powertrain, Magna Seating, Magna Closures, Magna Exteriors, Magna Interiors, Magna Mirrors, and Cosma International.

In 1957, the company was started by Frank Stronach as "Multimatic" and "Multimatic Motorsports." In 1969, the company amalgamated with Magna Electronics, and in 1973, the merged company became Magna International.

Magna produces auto parts that are mainly supplied to the Big 3 U.S. automakers- General Motors (NYSE:GM), Chrysler (FCAU) and Ford Motor Company (NYSE:F), and also to other major customers, which include Volkswagen (VLKAY), BMW (BAMXY), Tesla Motors (NASDAQ:TSLA), and Toyota (NYSE:TM). Magna Steyr holds contracts for the assembly of the Mini Countryman and Peugeot RCZ (UG) in Europe.

Magna has approximately 313 manufacturing operations with over 130,000 employees and 84 product development, engineering and sales centres spanning 29 countries. The company works under a corporate constitution which demands sharing of profits to employees and shareholders.

Samsung acquires EV battery-pack of Magna International Inc.

Magna International Inc. has agreed to sell its electric vehicle (EV) battery-pack business Magna Steyr, an Austria-based operating unit of Magna, to Samsung SDI Co. Ltd.

The South Korean multinational company will acquire all 264 employees, manufacturing and development sites and current active contracts of the business. The financial terms of the deal will not be revealed, and the deal is expected to be closed sometime during the first half of 2015, in accordance with approvals from regulatory authorities.

Samsung SDI is a major producer of batteries for energy storage systems, cell-phones and automotive uses.

The deal includes plants in Austria, China and Michigan, division of the assets Magna International received in 2012, when it paid $75 million to purchase the interest in Magna E-Car Systems LP held by Frank Stronach.

Magna International will continue concentrating on development of its main strengths, which includes engineering, drive trains and fuel systems.

How the deal will affect Magna International and Samsung SDI?

For Magna International, the deal of selling the battery pack is considered positive as it was a non-core business for the company. Considering the capital that would have been required, it was not likely that Magna would have pursued manufacturing scale.

The acquisition seems like an effective strategic step for Samsung SDI to make their mark and expand into the automotive battery business. The deal will help the company gain momentum to grow its business and customer base.

According to Samsung, this will enable the company to be able to generate a reasonable return on investment on batteries as compared to an auto parts company like Magna since Samsung is an electronic manufacturer, and already focuses on lithium-ion batteries.

Samsung expects that, by merging the company’s established leadership in battery cells and modules with Magna's skill in battery packs, it will augment Samsung SDI’s capacities in batteries for electric vehicles. The acquisition is also expected to help Samsung secure customers in the rapidly growing automotive battery markets in North America, Europe and China.

Takeaway

Samsung believes that the global market for all battery driven cars, which include electric, hybrid and plug-in hybrid vehicles will grow to 7.7 million vehicles by 2020, as compared to 2.1 million in 2014.

Keeping in mind that the EV industry is growing by leaps and bounds, and is on the verge of taking over a big part of the complete automobile market, the move by Samsung to acquire Magna’s battery-pack seems like a lucrative move.

About the author:

reports.droy
We are a group of analysts exploring and analyzing different domains of business and writing reviews based on information available in public domain web portals. We do not hold any stock or investment position in any of the companies that we write for.

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