10:18 AM ET 8/5/21 | Dow Jones
Every once in a while, a deal is proposed that makes investors jaws drop. Qualcomm's bid for automotive safety-parts supplier Veoneer should be one of those.
Qualcomm (ticker: QCOM) is offering to pay $37 a share for Veoneer (VNE)--a maker of advanced safety gear for cars such as lidar and radar sensors. (Lidar is essentially laser-based radar.) Advanced safety systems, working together with advanced software, eventually will make possible cars that drive themselves.
The Qualcomm offer tops the price of $31.25 the auto-parts giant Magna International (MGA) agreed to pay in late July
The competition is a sign that autonomous-vehicle, or AV, technology is heating up. Drivers can get cars today with so-called level 2 autonomous systems. These are systems combining adaptive cruise control and lane-keeping assistance that can do most of the work of driving in some settings. Drivers still need to pay attention with level 2 systems.
In coming years, auto makers expect to have technologies that will mean drivers don't have to do that. Estimates on when that might be vary, but 2025 is a good target. Between now and then, however, systems will continue to get better and sales for safety systems -- from Veoneer and its peers -- should grow.
The existing car and tech industries are likely to seek to stake out ground in that new arena between now and then. It is probably a good idea to bet on a victory for tech.
Qualcomm's market capitalization is $167 billion, and the stock trades for 16 times estimated 2022 earnings. Magna has a $25 billion market cap and trades for 9 times. It isn't really a fair fight, even if Magna would have an far easier time integrating Veoneer into their existing operations.
That doesn't mean auto investors should fret. Their assets are becoming more valuable as the world transitions toward electric and autonomous vehicles.
Veoneer stock was at about $20 before the Magna bid. Its market cap was about $2.2 billion or 1.3 times estimated 2021 sales. Now the company is worth $4.1 billion, or 2.4 times estimated 2021 sales.
The bid is good news for other lidar markers, such as Luminar Technologies (LAZR) and other safety suppliers such as Aptiv (APTV). It's also good for auto makers such as General Motors (GM), which has its own autonomous-driving technology.
It might not be as bullish for Tesla (TSLA,) which is seen as a leader in EV and AV tech. Companies like Qualcomm, or Intel (INTC) and even Apple (AAPL), pushing into the AV and EV business would mean more competition for Elon Musk's company.
The implications are endless, but the message is clear. The car business is becoming more of a technology industry day by day.
Write to Al Root at email@example.com