Magna International and Qualcomm Inc. tussled over the privilege of buying supplier Veoneer last month. Now, through a unique transaction structure, Qualcomm will walk away with the specific part of Veoneer that it wanted, while letting a private investment firm do the heavy lifting of buying Veoneer and figuring out what to do with the part Qualcomm doesn’t want.
And it has left open the door to the possibility that Magna could, if it chooses, end up buying a leftover piece of Veoneer.
A spokeswoman for Magna declined to comment.
It’s not a typical auto industry acquisition.
Qualcomm, a telecommunications and microchip producer with a burgeoning automotive business, last week won in its bid to acquire Veoneer’s advanced-driving software unit, Arriver, as part of a $4.5 billion deal, beating out an offer from supplier giant Magna International Inc.
But Qualcomm won’t ever own Veoneer as a whole.
Qualcomm teamed up with New York investment firm SSW Partners, which will acquire Veoneer outright, pending shareholder and regulatory approvals. Upon the deal’s closure, SSW will sell the Arriver unit to Qualcomm. The investment firm will then hold onto the remainder of Veoneer’s business with an eye toward finding long-term owners for it.
“It’s an unusual way to do it,” said Carla Bailo, CEO of the Center for Automotive Research in Ann Arbor, Mich. “Most companies, when they decide to sell out, try to find a buyer for the whole thing.”
For Qualcomm, Arriver was the crown jewel of Veoneer’s business. But after it sells off Arriver, SSW Partners will own Veoneer’s restraint control systems unit, as well as the remainder of the company’s active safety business.
Arriver is a big gain for Qualcomm’s rapidly growing automotive business, which centers around telematics, digital cockpits, automation and car-to-cloud technology. Qualcomm reported $253 million in automotive revenue in the quarter ended June 27, up 83 percent from a year earlier.
Qualcomm CEO Cristiano Amon said in a statement that the company is the “natural owner” for Arriver. It will integrate Arriver software, which was borne out of a partnership between Veoneer and Qualcomm last year, into its Snapdragon Ride advanced driver-assistance system platform.
Bailo believes that Arriver will help Qualcomm complete the picture for its automotive plans.
SSW, meanwhile, is charged with figuring out what to do with the rest of Veoneer’s business and supporting it in the meantime.
In a regulatory filing to the Securities and Exchange Commission, Veoneer said SSW would “work closely” with its management to “ensure the pursuit of Veoneer’s existing business plan” while it works to “identify strong long-term strategic partnerships” for the remaining units.
In a statement from SSW, attributed to two of its partners, Antonio Weiss and Josh Steiner, the company said: “We are committed to ensuring that Veoneer’s employees prosper, the businesses continue to innovate and grow, and customers continue to have uninterrupted access to the outstanding service and quality for which Veoneer is known.”
SSW was created this year by Weiss, a former counselor to the Treasury Department during the Obama administration; Steiner, a senior adviser at Bloomberg LP; and Eric Schwartz, a former Goldman Sachs executive.
Meanwhile, some observers wonder if Magna might end up with part of Veoneer’s other business, despite losing out on its bid for the company.
Bailo said it is unclear whether that would happen, but she noted that those business units fit nicely with the rest of Magna’s portfolio.
“I can understand why Qualcomm wants Arriver to fit into their portfolio,” Bailo said. But “I think it was the other assets, all of the active safety and all of the other technology, that really fits into [Magna’s] portfolio, based on their internal competencies.”
Magna is looking to grow its advanced-driving capabilities, she said.
“They’re trying to position themselves as a full supplier for ADAS technologies,” she said.
“That’s one portfolio piece that they don’t currently have. They’re huge. They do almost everything. But their ADAS side needs strengthening.”
Magna CEO Swamy Kotagiri in a statement seemed to brush off the missed chance to own Veoneer.
“We remain confident in our long-term value creation potential and our path forward as one of the world’s largest automotive suppliers and key enabler to meet future mobility needs,” he said in the statement.
Qualcomm and SSW will pay $37 per share, more than the $31.25 per share Magna offered. Veoneer will pay a $110 million termination fee to Magna, the world’s fourth-largest supplier by annual sales to automakers.
The Qualcomm-SSW deal is expected to close next year.
Bloomberg contributed to this report.