In the works: Motherson Group's offer to acquire Marelli Holdings

Indian group's offer to be placed before lenders on Monday

Motherson Group, one of India’s largest auto parts suppliers, is preparing to submit an offer on Monday to acquire Japan-based Marelli Holdings from US private equity firm KKR & Co, according to a person familiar with the matter.  The offer is expected to go before Marelli’s lenders, including a consortium of Japanese banks, who currently hold the majority of the company’s $4.2 billion debt and would need to agree to a debt haircut, the person said.  A majority of the lenders are leaning in favour of the deal, the person added, requesting anonymity as the information is not public. The deal would involve Motherson buying debt at the rate of 20 cents to a dollar, while KKR will write off its entire equity, said the source.  KKR declined to comment on the ongoing discussions. Motherson did not respond to emailed questions on the matter. 

Marelli was created in 2019 following KKR’s merger of Calsonic Kansei and Magneti Marelli. After the Japanese unit’s financial struggle, KKR wrote off its $2 billion investment in 2022 and has since  then injected a further $650 million in new capital to support the company's turnaround. Marelli’s performance has since improved with its operating income turning positive, and its 2024 margin higher than 2023, the person said.

 

Japanese lenders led by Mizuho Bank are understood to hold around half of Marelli’s outstanding debt, with the remainder held by held by a consortium of international creditors, including Strategic Value Partners, Deutsche Bank, MBK Partners, and Fortress Investment.

 

A successful acquisition would mark a significant leap for Motherson, positioning the company among the world’s top automotive parts suppliers, said an analyst tracking the sector. 

 

Marelli is a key supplier to Nissan Motor Co. and other global automakers like Stellantis. Marelli tried to improve its liquidity  position through various initiatives but has faced roadblocks by the international consortium.

  The deal comes at a time of growing uncertainty in the global auto industry. Fitch Ratings recently revised its outlook for the sector to “deteriorating” from “neutral,” citing escalating tariff risks and declining volumes in key markets such as the US and Europe, both of which are critical to Motherson’s growth strategy.  Fitch expects US and European auto volumes to fall by low single digits in 2025, and has lowered its earnings before interest, taxes, depreciation, and amortisation (Ebitda) margin forecast for Motherson’s key unit, Samvardhana Motherson International Ltd. (SAMIL), to 8-8.5 per cent for FY26 and FY27, down from 9 per cent in FY25. The ratings firm cited tariff-related cost pressures and global volume softness as key risks, though it noted SAMIL’s relatively diversified footprint, including US and Mexico-based production, which together account for 20 per cent of total sales.  SAMIL’s recent acquisitions in Japan, including Yachiyo Industry Co, Ichikoh Industries Ltd, and more recently, Atsumitec Co. Ltd, have expanded its OEM relationships beyond Europe and added product capabilities such as sunroofs, fuel tanks, and transmission components. Its acquisition of France-based AD Industries, a supplier of aerospace and medical device components, along with ongoing investments in non-automotive segments, is expected to enhance diversification and reduce dependence on the cyclical auto sector.  SAMIL’s acquisition strategy focuses on targeting attractively valued, strategically aligned businesses, while maintaining disciplined financial practices, according to Fitch. Since January 2023, the company has closed more than 16 acquisitions with a combined enterprise value nearing $1 billion, yet has improved its net leverage to 2.5x by FY23. While this approach supports its long-term revenue goals as outlined in its five-year plan, any large debt-funded transaction, such as a Marelli acquisition, could pose pressure on its credit profile, according to Fitch.