Faurecia sale: Cummins to acquire two plants

Cummins Inc. has made a deal to acquire part of Faurecia’s commercial vehicle exhaust after treatment business, including a manufacturing facility in Columbus.

The roughly $153 million deal announced Tuesday would transfer Faurecia’s Columbus South plant located off of County Road 450S and another manufacturing facility in Roermond, Netherlands, and their related activities to Cummins, the two companies said.

The proposed deal comes about three months after Faurecia said that it was in exclusive talks to sell part of its commercial vehicle exhaust after-treatment business in Europe and in the United States to Cummins for an enterprise value of roughly $159 to $160 million.

Faurecia said that the proposed deal announced Tuesday “secures the integration of these plants and their employees into Cummins’ worldwide operations, ensuring their long-term viability” and enables the France-based company “to focus on its exhaust activities on light vehicle ultra-low emission systems and its hydrogen roadmap.”

Cummins said that the acquisition “adds significant technical and manufacturing resources and enhances Cummins’ existing mixer portfolio” and would “position Cummins’ Emission Solutions business for long-term success.”

The agreement is expected to close this year but is still subject to regulatory approvals in the United States, Germany and the Netherlands, as well as a consultation process with the works council and trade unions in Roermond.

Cummins said that it intends to bankroll the acquisition using cash on its balance sheet.

“This proposed acquisition would enable both organizations to meet long-term strategic goals and would preserve business operations and employment for talented employees within the two plants and related tech centers, while creating value for customers and suppliers across the entire supply chain,” said Cary Chenanda, vice president of Cummins Emission Solutions, in a statement.

The deal with Cummins is part of a roughly $1.06 billion asset-disposal program by Faurecia to reduce debt and boost its balance sheet following the acquisition of a Germany company and Russia’s invasion of Ukraine, according to public filings and statements.

At the same time, FORVIA Group, which Faurecia is part of, has signaled that it intends to shift its business away from the internal combustion engine, with officials stating that the group’s “exposure to (the) internal combustion in 2025 would reduce towards 10%” should the deal with Cummins be finalized.

In August 2021, Faurecia announced plans to acquire German company HELLA, a move that the companies said would create the seventh largest automotive parts supplier in the world, which was later named FORVIA Group.

The roughly $5.74 billion acquisition, which was completed in February 2022, was bankrolled through a mix of cash, newly issued Faurecia shares and debt, which prompted Faurecia to initially announce a plan to dispose of $532 million “non-strategic assets” by the end of 2023 “to contribute to deleveraging post-acquisition.”

Deleveraging is when a company attempts to reduce its debt, also known as financial leverage, by raising capital or selling off assets.

However, Faurecia said in April 2022 that it would step up its asset-disposal program, raising its target to roughly $1.06 billion by the end of 2023 “to enhance financial flexibility in an environment that became increasingly uncertain after the outbreak of the war in Ukraine.”

Since then, Faurecia and HELLA have announced a series of moves to sell off assets that the companies say will help it reach the $1.06 billion target by the end of this year.

In July, HELLA said it would sell its 33% stake in a joint venture for about $308 million. In December, Faurecia announced plans to sell its interiors business in India.

Also in December, Faurecia and Michelin said they were in exclusive negotiations with Stellantis over a potential deal for Stellantis to acquire a “substantial stake” in Symbio, a Michelin and Faurecia joint venture that designs, produces and sells “hydrogen solutions” for light- and heavy-duty vehicles.

Just days after announcing the negotiations with Cummins in February, Faurecia said that it had reached an agreement to sell its “SAS” Cockpit Modules to division to an Indian company for an enterprise value of roughly $574 million.

Faurecia officials said previously the announced transactions put the company on track to dispose of $1.06 billion in assets by the end of this year.

This story is Andy East of The (Columbus) Republic, a sister newspaper to the Daily Journal.