Each week, Just Auto’s editors select a deal that illustrates the themes driving change in our sector. It may not always be the largest deal in value, or the highest profile, but it will tell us where the leading companies are focusing their efforts, and why.
Our thematic deal coverage is driven by our underlying disruptor data which tracks all major deals across our sectors.
Today, it’s the sale by Vitesco Technologies GmbH of Vitesco Technologies Italy Srl to Punch Torini SpA.
The deal
The background to this one is interesting. There’s a history going back to General Motors in Europe (before it sold its brands and quit the region), when it had a dedicated engines facility in Italy (Turin). Vitesco’s Italian operations (Pisa, Tuscany) also specialise in ICE components.
Within Germany-based Vitesco Technologies (a 2019 spin-off from supplier giant Continental), its Italian facilities specialised in providing injectors to OEMs. With more than 900 employees, Vitesco Technologies Italy Srl is active in the design, production, and sale of injectors, fuel distribution systems, and exhaust treatment systems for gasoline engines.
Belgium-based Punch acquired the General Motors Propulsion Engineering Center in Turin in 2020. Its core business is developing engine applications for new segments, supporting the manufacturing of engines, and providing both engine and transmission solutions in markets worldwide.
On 7th June 2023, it was announced that Vitesco Technologies would sell all shares in Vitesco Technologies Italy Srl to Punch Group (Punch Torino SpA). The projected value of the transaction was not disclosed.
The transaction is expected to close by the end of this year, subject to customary regulatory approvals.
Why it matters
This deal makes sense for both parties in terms of their respective strategic directions. The product offering of Vitesco Technologies Italy – with the emphasis on ICE tech injectors and fuel distribution systems – is a very good synergistic fit to Punch’s ICE-based powertrain and transmission business. With post-acquisition GM legacy business in decline, the acquisition means that the new larger business has a more integrated solution – and more value – to offer OEMs. The transaction will allow Punch Torino to expand its business operations considerably.
While for the industry globally ICE-based powertrain business is often (and rightly) seen as on an inevitable path of gradual decline, there are, nevertheless, profits to be made on the business that will continue will into the 2030s in various parts of the world. Moreover, alternatives to fossil-fuel based automotive powertrain tech continue to emerge – not least in the shape of synthetic ‘e-fuels’ that could potentially be utilized in future ICEs. Further, Punch is investigating hydrogen tech which holds out the possibility of future hydrogen injection systems which, combined with Punch Group’s existing capabilities in the development of engines, transmissions and electronic controls, could lead to a solution breakthrough for future ICEs.
For Vitesco, the strategic drive is firmly in the opposite direction towards e-mobility using current battery-based technologies. It wants to speed up its move into providing e-mobility systems and components. In the case of the Italian injectors business, it was likely a seller’s market, with under-pressure Punch anxious to acquire the complementary Italian assets to give its ICE-based product offerings a chance.
Vitesco Technologies is understandably keen to display its growing e-mobility business credentials. It said a few months ago that the volume of its order intake in 2022 totalled €14 billion – of which electrification accounts for €10.4 billion. The company expects to generate sales of around €5 billion in the electrification business in 2026. The aim is to grow that to sales of €10 billion to €12 billion in 2030.
Vitesco’s strategic priority is therefore clearly in developing its electrification-based business and the sale of its Italian injectors unit allows it to pivot its resource base further for exactly that. It also removes a legacy distraction with poor growth prospects.
GlobalData analysis also highlights the dynamic environment for M&A activity in automotive. GlobalData analyst Al Bedwell points out: “We’re seeing companies divesting or investing where they can, looking to specialize and competitively position themselves for future profitability.
“There are a lot of unknowns in terms of precise future powertrain mix and some emerging technologies – such as hydrogen – and companies have to take tough decisions on where to make their investments and concentrate their resources.
“Furthermore, the supply chains in electrification – take batteries for example – are still being formed and that process will go on for many years. At the same time, and a little counter-intuitively, there is still profitable business to be done in bringing all forms of hybrids and ICEs to market with the right technologies – and ever lower CO2 emissions – at the right price.”
As this Italian automotive components deal shows, it’s still a very dynamic picture in terms of the changing corporate landscape and opportunities for M&A and/or restructuring activity.
More research:
Vitesco Technologies – Company Profile
The Global Data Automotive Intelligence Center
