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May 25, 2022 04:59 AM

Leoni to sell cables business to Asian rival as sales fall during Ukraine war

The German supplier has been hit hard by the war in Ukraine with sales falling nearly 7 percent in the first quarter.

Nathan Eddy
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    Leoni cable site Roth, Germany

    German wiring system manufacturer Leoni is selling its automotive standard and special cables business to Stark Corporation.

    The Stark Corporation is a supplier of wires and cables in Southeast Asia.

    The sale does not include Leoni’s wiring systems business, which makes cable harnesses and includes two Ukraine factories whose production has been hit by Russia's invasion of the country.

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    "With this decision, we strengthen our balance sheet, support the ongoing talks regarding our refinancing and drive forward our well-known strategic focusing on the wiring systems business," Leoni CEO Aldo Kamper, said in a statement.

    The cables business unit has a global production network with ten locations in seven countries and around 3,300 employees, specializing in automotive standard, special and charging cables.

    The cable business unit’s sale activities generated a sales volume of approximately 1.3 billion euros ($1.39 billion) in the 2021 fiscal year, with an estimated enterprise value of 560 million euros ($600 million).

    Leoni said finalization of the sale would be subject to various closing conditions, including required merger control and investment control clearances, expected to be granted within six months.

    The closing of the transaction is also subject to the approval of Leoni’s ‘s financing partners.

    Leoni has been hit hard by the war in Ukraine. In the first quarter, sales had slipped 6.9 percent year-on-year to 1.26 billion euros ($1.35 billion).

    Related Article
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    How Russia's invasion of Ukraine is impacting automakers

    The sale comes as Leoni finds itself in fresh financial trouble. The company is trying to raise 50 million euros ($53 million) on the capital market.

    Plans to sell the wire and cables division date back to 2019 as part of a restructuring plan, according to a Reuters report from November 2019.

    Leoni has been struggling for years and only a year ago reported a return to the black. The continuing supply bottlenecks, the steep rise in energy costs and the war are now causing the company renewed trouble.

    Earlier this month, the supplier said production of wire harnesses, a critical component for automakers, has almost returned to prewar levels at two factories in Ukraine. The supplier has about 7,000 employees in Ukraine, out of a total global work force of 101,000.

    CEO Kamper will be a speaker at this year's Automotive News Europe Congress in Prague.

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