Set up in 2004 by Wang Jianfeng, Joyson Electronic has quickly developed into one of China’s largest auto component suppliers and has a rafter of global marquee clients, including car makers Volkswagen, General Motors, and Mercedes-Benz.
The company, which is little-known to foreigners, has now set its sights on cutting-edge self-driving and smart-car technology and aims to become a top supplier in these fields.
“Autonomous driving will fundamentally change the automobile industry or even the transportation industry,” the company said in the filing, adding that it will take 15 years for the technology to be used widely. It also estimated that the average annual compound growth rate for the self-driving component of its business would be up to 42% over the next decade.
The takeovers highlights how auto companies in China, which boasts the world's biggest car market, is scanning for overseas deals that might help them gain high-tech expertise. Dealogic data shows Chinese companies spent nearly $10 billion on 21 foreign auto and truck deals last year, up from $2.1 billion on 19 deals a year earlier.
Road safety
For Joyson Electronic, it is also not the first time it has snapped up foreign auto assets. The company bought a near-60% stake in Preh GmbH for $183 million in 2012 and acquired Quin GmbH for $113 million in 2015, according to Dealogic. Both are German auto suppliers.
But this time Joyson Electronic seems to have a different agenda with big auto makers such as Volvo actively being encouraged by Beijing to deploy self-driving cars on China’s public roads as a way to improve road safety.
The American firm KSS, which has traditionally focused on safety-related components such as air bags, inflators, and seat belts, is the world’s fourth-biggest auto safety supplier with a global market share of 7%, after Sweden’s Autoliv (37%), Japan’s Takata (20%), and US firm TRW Automotive, according to Chinese brokerage Sinolink Securities. It is now tapping autonomous-driving innovations, including collision avoidance technology and autonomous parking functions.
The takeover of TechniSat Digital’s auto navigation division, meanwhile, would help Joyson Electronic to develop information and navigation systems as well as car connectivity to help maintain safe distances and avoid accidents.
“Acquiring KSS can help the company develop active safety [system] while acquiring TS [division] can let it gain key software of self-driving, which could help it transform from a product supplier to a platform provider driven by technology,” Liu Yang, an equity analyst at Everbright Securities, said in a note in late March after Joyson Electronic said it intended to acquire both companies.
Joyson Electronic said in mid February that it planned to raise up to Rmb8.6 billion ($1.3 billion) in a private placement of shares to fund overseas acquisitions. It added in Friday’s filing that it is seeking loans totaling Rmb4.5 billion from big state-owned Chinese banks, including Industrial and Commercial Bank of China and Agricultural Bank of China.
Based in the prosperous eastern coastal city of Ningbo, Joyson Electronic employs more than 7,000 people and runs 20 production and distribution bases in China, Germany, the US, Mexico, and Poland. It reported revenues of Rmb8.08 billion and a net profit of Rmb400 million last year.
Both deals are subject to regulatory approvals. The KSS acquisition is expected to completed before June-end.
