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ICICI Securities Report
Samvardhana Motherson International Ltd. has entered into an agreement with Honda Motors to acquire 81% stake in Yachiyo Industry's four-wheeler component business (Honda group currently owns 51% stake in it and is a publicly listed entity) for an equity consideration of €145 million, with the entity being net cash.
With 9% share in global car sunroof market and catering across key geographies, we believe this acquisition would help Samvardhana Motherson in expanding its presence amongst Japanese original equipment manufacturers, especially Honda, as 90% of Yachiyo's revenue comes from Honda itself.
This deal would not only add fuel tanks and sunroofs to Samvardhana Motherson's portfolio but also help it cross sell other key products (such as plastic parts, wiring harness and vision systems) across key Japanese OEMs, including Honda (revenue mix of Honda to move from 1% to 6%).
A sub-three times enterprise value/Ebitda valuation for the deal, we believe, is a reflection of fuel tank business going extinct in the longer run and Honda's willingness to associate with Motherson group in a larger way.
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