French car parts supplier Faurecia said its new combination with Hella would result in it aiming for sales of above 33 billion euros ($37.72 billion) in 2025, and an increased annual cost savings target of 250 million euros.
Faurecia, which produces seating, electronics and other car interior components, issued those financial targets as it marked the completion of its previously-announced takeover of German car parts supplier Hella.
“Faurecia’s acquisition of Hella is a unique opportunity for two advanced technology companies to accelerate their transformation, achieve critical size and leading positions in electronics and lifecycle Solutions,” said Faurecia on Monday.
Shares in Faurecia were up by 2.4 percent in early session trading while shares in Hella traded flat.
The new name of the combined group resulting from the 6.7 billion euro acquisition will be announced later on Monday, added Faurecia.
The deal, sealed in August when its controlling family shareholder chose Faurecia among several bidders, marks the end of an era for the German lighting and car electronics manufacturer founded in 1899, when it produced oil lamps for carriages.
The takeover will allow the group to save costs of more than 250 million euros per year, Faurecia said, hiking its previous synergy forecast of 200 million euros.
“This should enable the group to offset higher external headwinds that appeared since deal announcement, notably inflation (...) and tends to support our positive stance on the combination,” said Oddo BHF analyst Michael Foundoukidis.
Faurecia also confirmed it sees revenues to increase by between 300 and 400 million euros by 2025, while cash-flow optimizations are seen to generate around 200 million euros per year on average from 2022 to 2025.
Both companies recently had been shaken by a slowdown in the global auto market, forcing them to cut their outlooks.
In November, Faurecia cut its full-year guidance for a second time, citing a drop in European car production, the impact of supply bottlenecks and COVID-19 restrictions on operations and one-off costs in the United States.
The company now forecast 2021 sales of between 15 billion-15.5 billion euros and an operating profit margin of 5.5 percent, compared to a previous target of sales at 15.5 billion euros and a margin of between 6 to 6.2 percent.
Hella had also scrapped its full-year guidance, now seeing currency and portfolio-adjusted sales in a 5.9-6.2 billion euro range.
Hella will continue to be a listed company with its own independent governance, Faurecia said, adding that Juergen Behrend, a representative of the Hueck family which previously controlled Hella, will be proposed to Faurecia’s board of directors.