AUO to buy German automotive electronics maker for 600 million euros

Taipei, Oct. 3 (CNA) AUO Corp., a leading flat panel brand in Taiwan, has agreed to acquire a German-based automotive electronics supplier Behr-Hella Thermocontrol GmbH (BHTC) at a cost of up to 600 million euros (US$628 million) as part of the company's ongoing efforts to diversify its product portfolio.

AUO said in a statement on Monday that the acquisition of BHTC, currently a joint venture between MAHLE Behr GmbH & Co. KG and HELLA GmbH & Co. KGaA each owning a 50 percent stake, has been approved by its board of directors.

The deal is expected to be completed by mid-2024, subject to the clearance of customary antitrust and regulatory approval, according to AUO.

The Taiwanese flat panel maker said BHTC specializes in the development, manufacture and sale of Human Machine Interfaces (HMI), Climate Control (CC) and Electronic Control Units (ECU) for the automotive industry.

In addition, BHTC, which was founded in 1999, possesses world-leading resources and development capabilities, with Tier 1 supplier abilities, the flat screen supplier said.

The acquisition reflects an effort to expand its smart mobility business as well as a critical chance for the flat panel maker to broaden its product portfolio and customer base, AUO said.

The transaction is expected to allow the company to shift its positioning from a panel maker to a technology solutions provider that offers products and services across multiple verticals, AUO added.

Through HMI's integration of in-vehicle displays, automotive systems, embedded sensors and software services, the flat panel maker has progressively expanded its smart cockpit solutions and is looking to become an ultimate leader in the future of smart mobility services, according to the company.

"Against the backdrop of increasing global competition and industry value chain restructuring," AUO Chairman and Group Strategy Officer Paul Peng (彭双浪) said in the statement. "The integration of AUO and BHTC will harness the core advantages of each platform to achieve complementary synergies."

"By leveraging both companies' global operations, local manufacturing facilities, and top-notch visionary research and engineering teams, we aim to accelerate the interconnection of world-wide automotive industry supply and value chains to provide outstanding and diverse innovative solutions for our global customers and partners," he said.

According to AUO, BHTC, headquartered in Lippstadt, Germany, currently runs subsidiaries in the United States, Japan, Bulgaria, Finland, Mexico, India and China, with a global workforce of about 2,900.

In fiscal year 2022, BHTC posted about 619.1 million euros in sales, 16.2 million euros in operating profit and a net profit of 9 million euros, AUO said, adding that it will use its own funds to finance the acquisition with no plan to raise any additional capital for the deal.

AUO said Morgan Stanley served as the exclusive financial advisor to the flat panel maker in the acquisition deal, while Davis Polk & Wardwell LLP acted as legal counsel for AUO to pursue the acquisition.

A foreign brokerage said BHTC is expected to contribute only 9-10 percent to AUO's sales with a net margin -- the difference between gross profit and total expenses including interest payments and taxes -- likely to be merely 1.5 percent in the near future. However, over the longer term, the acquisition is expected to help the Taiwanese suitor strengthen its capabilities in the field of automotive electronics.

The foreign securities house said the deal is expected to consume about 20 percent of AUO's cash-on-hand.

On Tuesday, shares in AUO rose 0.93 percent to close at NT$16.20 after coming off a high of NT$17.20 as investors took profits from initial gains resulting from the acquisition deal.