Buyout firm KKR (KKR) - Get KKR & Co. Inc. Class A Reportsaid it would make a tender offer to wholly acquire Calsonic Kansei, a car components affiliate of Nissan Motor (NSANY) , for ¥498.3 billion ($4.5 billion), in a bid to boost the competitiveness of the supplier participating in a market growing at a pace of 15% a year as automakers rapidly venture into electric vehicles and self-driving cars.
The agreement, announced on Tuesday, includes the New York-based KKR buying 40.68% of Calsonic Kansei's shares from Nissan. KKR will start the tender offer in February 2017, with a plan to pay ¥1,860 per common share, which represents about a 28% premium to Calsonic Kansei's Tuesday closing price of ¥1,450.
Calsonic Kansei is KKR's largest Japanese acquisition to date. Three other purchases in the country -- Intelligence, Panasonic Healthcare and Pioneer DJ -- were all valued below $1 billion.
The announcement was made after the markets closed in Japan. Calsonic Kansei shares closed up 9.7%. The company's shares have jumped 36% in the past 12 months.
With the acquisition, KKR aims to make investments in plants and equipment, seek M&A transactions and help expand the company's customer base as well as boost the profitability of its products.
Nissan, which is Calsonic Kansei's largest customer, said the sale was aimed at boosting the supplier's competitiveness during a time of increasing demand to incorporate more electronics and intelligence into vehicles, as that would ultimately lead to boosting Nissan's own competitiveness. The automaker also highlighted increasing need to address globalization, safety, quality and environmental regulations.
Nissan said it approached "several companies" in April 2016, a move which resulted in several, including KKR, proposing tender offers. The Japanese automaker entered into final negotiations with KKR in early November based on the firm's ability to further enhance the competitiveness and enterprise value of Calsonic Kansei, and the attractiveness of the offer price.
"Nissan is hoping to further increase the competitiveness of Calsonic Kansei-one of our most important partners," said Nissan chief competitive officer Yasuhiro Yamauchi. "KKR recognizes the company's potential."
The car electronics market, which includes products such as "infotainment" and interior electronics, is estimated to grow at a compound annual growth rate of 14.42% between 2016 and 2020, according to financial information provider MarketWatch.
Other prominent players in the car components market include Germany's Continental (CTTAY) , France's Valeo (VLEEY) , Japan's Denso (DNZOY) and Aisin Seiki (ASEKY) , as well as U.S.'s Lear (LEA) - Get Lear Corporation Report and Delphi (DLPH) - Get Delphi Technologies Plc Report .
Consumer electronics players are also showing increasing appetite for the market, the most recent example being Samsung Electronics (SSNLF) , which agreed to buy Harman International (HAR) for $8 billion last week.
Calsonic Kansei, based in the Saitama prefecture just north of Tokyo, is one of Japan's largest supplier of car components including compressors, climate control systems, exhaust systems, and heat exchange products. The auto parts supplier also manufactures electronic products.
For Nissan, the stake sale would generate about ¥143.4 billion in extraordinary gains for the year ending March 2017. On November 7, the automaker reiterated its earnings outlook for the year, saying it expects to book net profit of ¥525 billion on sales of ¥11.8 trillion. The sale of Calsonic Kansei would mean the auto supplier will be deconsolidated from the Nissan group.
Nissan sets its eyes on 2020 to boost the number of so-called connected cars, or vehicles with Internet access, and release more than 10 self-driving cars.