Valeo back on acquisition trail

By Marcel Michelson

FRANKFURT (Reuters) - French car parts maker Valeo (VLOF.PA: Quote, Profile, Research, Stock Buzz) could soon be back on the acquisition trail as asset prices have returned to more affordable levels now the credit crisis has diminished the appetite of private equity firms.

"Absolutely, I believe that prices are getting reasonable, and therefore you will probably see Valeo on the acquisition side next year," Chairman and Chief Executive Thierry Morin said at the Reuters Autos Summit in Frankfurt.

"Not enlarging our portfolio of products -- we do not believe we that need at all -- but strengthening the technology of our products ... in electronics, or power electronics, which are getting more important," he added.

Morin last year unveiled his strategy for the period up to 2010, which includes an operating margin of more than 6 percent and a return on capital employed of 27 percent, which will require better utilization of machines, a leaner organization and reduced working capital.

The strategy was unveiled at a time when Pardus Capital Management was building up a stake. It is now the single biggest share holder, with 18 percent. Valeo rejected a request by Pardus for eight board seats and a strategy overhaul.

Morin said Pardus had wanted Valeo to acquire Visteon (VC.N: Quote, Profile, Research, Stock Buzz), in which the fund also has a stake, and added this would have destroyed value for the other shareholders of Valeo.

"You cannot have one shareholder pursuing a strategy that may be negative for other shareholders," he said.

He noted Pardus had since taken stakes in the U.S. airlines sector and in French technology firm Atos Origin. (ATOS.PA: Quote, Profile, Research, Stock Buzz).

"If he (Karim Samii of Pardus) comes back, even with a more modest demand but having still this sort of strategy, my answer will have to be the same," he said.

"On the other hand, if he wants to participate in our strategy in all good faith, I have no problem," he said.

Valeo makes many systems that can reduce carbon dioxide emissions from cars, and Morin is a strong proponent of tighter regulation. He said the current European Commission plan for a cap of 120 grams of CO2 per kilometer by 2012 was not enough. He would prefer 120 g by 2010 and a clear road map for how to get to 110 and 100 g.

"I think there should be more visibility for carmakers," Morin said, adding Valeo had demonstrated that 40 percent reductions in emissions were feasible. "I am saying, 120 grams, yes, but 2012, No. This is five years from now. This is too late. And when is 110? When is 100? When is 90?," he asked.

(For summit blog: summitnotebook.reuters.com/)

(Editing by Will Waterman)