KKR, Japanese banks pump $1.2b into Marelli

The funding takes the form of an equity cure from KKR and debt from Japanese banks. Prior to the capital injection, Marelli’s debt-to-EBITDA was 6x, according to a source familiar with the situation. The return on the investment – made three years ago – in KKR’s most recent fund reports is 0.5x.

Last month, IHS Markit projected that global auto sales would decline 22% year-on-year in 2020 to 70.3 million units, the lowest level since 2010 when the industry was emerging from the global financial crisis. Sales in the US will drop 12% to 12.5 million units, while China will see a 15.5% decrease to 21 million units. Global light vehicle production is expected to drop by 21.2%.

Prior to the COVID-19 outbreak, which has severely curtailed purchasing, Marelli was under pressure due to weak performance from Nissan, one of its largest customers. The Japanese automaker has seen sales decline two years in a row, losing ground to Toyota and Honda in the process. Nissan’s operating profit has fallen for four consecutive years and it expects to post an operating loss for the 12 months ended March.

Marelli said the new funding would give it “greater long-term security and flexibility … in the event of an extended market downturn.” The company added that numerous other measures have already been taken in response to COVID-19 induced shutdowns.

KKR completed a JPY498.3 billion acquisition of Calsonic in 2017, first agreeing to buy Nissan’s 41% holding in the company and then launching a tender offer for the entire business. At the time, Nissan accounted for 80% of transactions. A year later, Calsonic bought Magneti Marelli, the auto components business of Fiat Chrysler Automobiles (FCA), for EUR6.2 billion ($7.1 billion).

The combined entity is the world’s seventh-largest independent auto components supplier. It employs around 60,000 people across 170 manufacturing and R&D facilities in Asia, the Americas, Europe, and Africa, and generated EUR13.4 billion in revenue last year. Key product areas include lighting, powertrains, climate control systems, electronics, and vehicle interiors.

“The effect of the COVID-19 pandemic on the global automotive industry has been significant. This funding demonstrates the strong support of our shareholder and our banks and their belief in the outlook for Marelli, its people and our overall strategy,” said Christoph Hobo, CFO of Marelli, in a statement.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• North Asia
• Europe
• Financing
• Industrials
• Japan
• manufacturing
• automobiles
• KKR