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Bidding War Brewing for Veoneer (VNE): Here's What You Should Know

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Veoneer, Inc.’s $3.8-billion buyout offer by Magna International (MGA - Free Report) hit a roadblock recently, when chipmaker Qualcomm (QCOM - Free Report) submitted a non-binding proposal to acquire all of the outstanding shares of Veoneer for $4.6 billion.

Based in Stockholm, Sweden, Veoneer designs, develops and manufactures innovative software, hardware and systems for occupant protection, advanced driving assistance systems (ADAS), collaborative and automated driving. The autotech company spun off from long-time safety equipment supplier Autoliv Inc. (ALV - Free Report) in 2018, and offers radar systems, brakes, driver monitoring equipment, restraint controls and driver assist software.
This July, automotive supplier Magna submitted an offer to acquire all of the issued and outstanding shares of Veoneer for $31.25 per share in cash, representing an equity value of $3.8 billion and an enterprise value of $3.3 billion. The transaction had been unanimously approved by the boards of both companies.

Headquartered in San Diego, CA, Qualcomm designs, manufactures and markets digital wireless telecom products and services based on the Code Division Multiple Access (CDMA) technology. These products include CDMA-based integrated circuits (ICs) and system software for wireless voice and data communications, as well as global positioning system (GPS) products.

Qualcomm’s bid, which is $800 million more than Magna’s offer, has already received approval from the company’s board and does not require a shareholder approval. Qualcomm’s offer comes in at $37 per share, marking an 18% premium to the offer from Magna. The acquisition would be funded through the company’s existing cash in hand.

Following news of the latest offer, shares of Veoneer rallied 28.5% yesterday, to close the trading session at $40.15.

Veoneer's board of directors will evaluate the proposal from Qualcomm and the terms of the Magna merger agreement before making a final call. It is debatable whether or not Magna will submit a counter-bid.
Amid the transforming face of the auto industry, it has become imperative for automakers to have a partner who develops horizontal platforms that bring innovation and enable competition. For Qualcomm, the proposed acquisition will bring Veoneer’s complementary technology and customer base to deliver a competitive ADAS platform to automakers and Tier 1 suppliers at scale. For Magna, the acquisition is anticipated to result in greater ADAS content per vehicle and fortify its global skill base. Moreover, the combined entity will be an industry leader in active safety solutions, positioning itself well for the transition toward greater levels of autonomy.

For Veoneer, a buyout is equally beneficial. It will deliver an outstanding value to Veoneer stockholders through an alluring premium and provide employees the opportunity to work with one of the most accomplished suppliers in the auto space.

Veoneer already has an existing relationship with Qualcomm. The two companies signed an agreement this January to collaborate on an ADAS platform. The agreement merges Qualcomm’s silicon technology and tool chain with Veoneer’s sensor and software system in an extremely competitive ADAS solution. This pre-relationship provides rationale for Qualcomm winning the buyout offer.

The ongoing bidding war between Magna and Qualcomm bodes well for the future of ADAS technology. Well, only future will reveal which company emerges victorious in this battle, to become a leading name in the ADAS market.

Veoneer currently carries a Zacks Rank of 4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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