Fiat Chrysler's (FCA) bottom line is now a little fatter.
Japan's Calsonic Kansei, owned by US private equity firm KKR, has agreed to buy Fiat Chrysler's Magneti Marelli for 6.2 billion euros ($7.1 billion) to form the seventh-largest independent auto parts supplier.
"An ideal opportunity to accelerate Magneti Marelli's future growth for the benefit of its customers and its outstanding people", is how Fiat Chrysler's CEO Mike Manley postured the deal.
With the sale of the parts division, FCA will also have funds on hand for the major investments required in electrification to meet stricter global emissions regulations.
FCA shares were up 3.6 percent at 1358 GMT as investors welcomed the hefty price tag, which will boost FCA's net cash position, raise expectations of a share buyback and pave the way for dividend payments the carmaker promised under its new five-year strategy plan unveiled in June.
Timing is everything and Chrysler Fiat no doubt hopes to profit off that uncertainty by recentering the company's vision toward the auto world's technology-driven future. Calsonic initially made a bid of $6.7 billion, according to the report. And now he's done it, selling off the component-supply unit to a leading competitor. Magneti Marelli specializes in lighting, powertrains, and high-tech electronics.
"Our industry has gone through fierce change in recent years and the phase to come will be even more dynamic", said Bolzenius. FCA preferred to sell to a firm like Calsonic over a pure private equity firm as it would reduce the likelihood of breaking up the business.
The deal is expected to close in the first half of 2019, pending regulatory approval.