Auto-parts maker Veoneer was being courted by parts giant Magna International and tech giant Qualcomm, which won.
Courtesy VeoneerAuto-parts maker Veoneer was being courted by parts giant Magna International and tech giant Qualcomm in a deal that was all about the future of self-driving cars. Qualcomm won in a complicated transaction.
Magna (ticker: MGA) announced plans to buy Veoneer (VNE) back in July, agreeing to pay more than $3 billion because it believed Veoneer’s advanced safety business—including things such as radar which enable self-driving features on modern cars—was a good fit for its auto-parts-business portfolio.
Then Qualcomm (QCOM) offered almost $4 billion for Veoneer in August, trumping the Magna bid. In the end, Veoneer is going with Qualcomm. Veoneer shareholders will get $37 a share, more than the $31.25 offered by Magna.
Veoneer stock is up 4.4% to about $36 in Monday trading. The deal should close in 2022.
Magna stock is up 1.2% now. Shares sometimes trade down on large deals; Magna traded down almost 5% the day it announced the deal with Veoneer. The rally comes as investors don’t have to worry any longer about integrating two businesses or taking on more debt.
Qualcomm stock is down 1.2%. The deal isn’t like the reason. The deal for Qualcomm isn’t large. In fact, large for an automotive company isn’t large for a tech company.
The Nasdaq Composite is down almost 2% Monday. The S&P 500 and Dow Jones Industrial Average are down 0.6% and 0.7%, respectively.
Qualcomm’s market value, including market capitalization and debt, is about $146 billion. Magna—one of the largest auto-parts suppliers in the world—has a market value of about $26 billion. Tech companies simply have more buying power than car companies.
The deal is structured in an interesting way. Veoneer is being acquired by investment firm SSW Partners. Then SSW is selling Veoneer’s “Arriver” self-driving business to Qualcomm. SSW will keep an auto-parts business and Qualcomm will integrate the active safety products and software into its automotive-microchip business.
“Qualcomm is the natural owner of Arriver. By integrating these assets, Qualcomm accelerates its ability to deliver a leading and horizontal [advanced safety] solution as part of its digital [car] platform,” said Qualcomm CEO Cristiano Amon in the company’s news release. “This transaction and structure benefits both Qualcomm’s and Veoneer’s shareholders.”
Magna, for its troubles, gets a $110 million deal-termination fee.
“Magna’s…decision underscores our disciplined approach to valuation as we pursue strategic acquisitions and continue to act in the best interests of our shareholders” said CEO Swamy Kotagiri in a news release. He didn’t want to overpay. “We remain confident in our long-term value-creation potential and our path forward as one of the world’s largest automotive suppliers and key enabler to meet future mobility needs.”
Write to Al Root at allen.root@dowjones.com
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