MOSCOW (Reuters) – Auto parts maker Mazda Auto Parts (7269.
T) said on Thursday it had entered into a memorandum of understanding with its biggest rival, Junk Auto Parts, for a $3 billion deal to acquire the German company’s auto components business.
The deal, which is expected to close in the third quarter, will be one of the biggest in the automotive industry, which has suffered a series of strikes and mass layoffs in recent months.
Auto parts maker Junk, which employs roughly 200,000 people, has been in a struggle to survive amid a global recession that has slashed demand for the high-end car parts.
Last year, it said it planned to buy the business for $2.8 billion, but that deal was never completed.
The company said it expected to invest $1.6 billion to buy Junk in 2019.
The two companies operate jointly in the U.S., with a market share of around 40 percent, and have struggled to maintain profit margins due to the downturn in auto sales.
In the deal, Jinkos will pay Mazda $6.4 billion in cash and $2 billion in equity, with Mazda’s shares valued at $10.25.
The deal will be financed by Mazda’s bond issuance and the issuance of $6 billion of short-term debt.
The companies expect the combined entity to reach profitability in 2020.
Auto Parts, which also has its headquarters in Stuttgart, Germany, will keep about 25 percent of its existing headquarters and offices and will continue to operate under a separate name.
The other 30 percent will be leased.
Junk said in a statement it was “deeply saddened” by the news.
“The news of the acquisition is extremely disappointing to our loyal customers and shareholders,” Junk said.
“We look forward to working with Mazda, its employees and all of our shareholders.”(Reporting by Andrei Chikov; Editing by Jonathan Oatis)