Don Walker, CEO Magna International Inc.Fernando Morales/The Globe and Mail
Auto parts giant Magna International Inc. has reached a deal to buy the remaining 27 per cent stake in Magna E-Car Systems for $74.7-million.
Magna's purchase in the stake of E-Car, formerly owned by an affiliate of the Stronach Group, values the company at almost $300-million.
The announcement comes more than a year after Frank Stronach, 80, stepped down as chairman of the company, an occasion that was marked by controvery over an expensive buyout of the multiple-voting shares with which he controlled it for more than three decades.
It also comes about two years after a sale of surplus Magna land to Mr. Stronach, a move that prompted shareholder advisory firm Glass Lewis and Co. to urge shareholders to vote against Mr. Stronach's reappointment as a director by witholding their votes. Don Walker, the company's chief executive officer, said Mr. Stronach "will not have any direct involvement in E-Car going forward."
"We're going to own 100 per cent of E-Car's business and assets," Mr. Walker said, as the company reported record sales in the second quarter of 2012. Sales of $7.7-billion, an increase of five per cent over the same quarter of 2011, come on the back of a significant increase in vehicle production in North America. "We are pleased to regain control of this business." The transaction is expected to close in August.
E-Car had posted losses in the first half of 2012, and continued losses are expected through the year. "Like any operation as it starts to ramp up production... we'll incur some expenses, but once the sales start to come in to fruition, the cash situation will change, Mr. Walker said.
He said E-Car is now working on a battery electric Ford Focus that is "launching now" and a "number of component contracts which will be launching over the next little while in North America." He also alluded to a large European project expected to launch in 2013, but did not release details.
"We expect electrification of vehicle powertrains, hybrid and electric vehicle production and their associated components to continue to grow globally in the future," Mr. Walker said.
Canada's biggest auto parts supplier saw production sales decrease by $9-million in Europe. North American and rest of the world sales rose by 11 per cent and 24 per cent respectively. Diluted share profit increased $0.33 to $1.48. The results were released after markets closed and follow a record annual profit in 2011 and strong first-quarter results in 2012.