Magna International, Inc. (MGA) has inked an all-cash deal to acquire automotive safety technology provider Veoneer, Inc. (VNE) for a total consideration of $3.8 billion. The deal is expected to conclude by the end of this year.
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The acquisition is likely to boost Magna’s advanced driver assistance systems (ADAS) customer base and expand its reach to new markets such as Asia. Veoneer’s restraint control systems will enrich Magna’s ADAS business.
The acquisition of Veoneer is expected to generate around $100 million in annual run-rate synergies by 2024. Furthermore, Magna’s balance sheet is also expected to improve, following the closure of the deal. (See Magna stock chart on TipRanks)
The CEO of Magna, Swamy Kotagiri, said, “Veoneer’s complementary technology offerings, customer base, and geographic footprint make it an excellent fit with our ADAS business, and the acquisition strengthens our global engineering and software development talent base.”
Last month, following a long-term manufacturing agreement between Magna and Fisker (FSR), Goldman Sachs analyst Mark Delaney upgraded Magna to a Buy from Hold and raised the price target to $120 from $97. The price target implies 41.2% upside potential.
Delaney is encouraged by the reasonable valuation of Magna. Moreover, he believes that the company is well-positioned to support new market entrants. Consensus among analysts is a Strong Buy based on 8 Buys and 1 Hold. The average Magna price target of $116.3 implies 36.9% upside potential.
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