When Canadian auto supplier Magna International Inc. put a “compelling” offer on the table that was too good to pass up, Baumgardner knew that even though Donnelly was “absolutely not” for sale, it was time once again to embrace change.
“If you’re not changing, you’re not growing. If you’re not growing, you’re dying,” Baumgardner said in an interview days after the announcement of a $415 million stock-and-debt deal to merge Donnelly Corp. into the Aurora, Ont.-based Magna International.
“You have to be open to possibilities and you have to go after it,” said the 61-year-old Baumgardner, who joined Donnelly in 1967 as manager of product research and development and who has led the company since 1986.
“All things considered, this looks so compelling,” he said.
Under the merger, Donnelly Corp. will become a wholly owned subsidiary of Magna International, which will roll its mirror unit into the new Holland-based Magna Donnelly to create the world’s largest producer of automotive mirrors with $1.2 billion in annual revenues.
The acquisition, scheduled to close in September, is subject to approval from U.S. and European antitrust regulators and shareholders for Donnelly and Magna, one of the largest auto suppliers in the world with 2001 revenues of $11 billion and a global workforce of 67,000. Donnelly, by comparison, recorded 2001 revenues of $847.9 million and employs about 6,000 people worldwide.
Baumgardner sees plenty of positives resulting from the deal, which has generated some concerns locally about the loss of yet another home-grown corporate citizen. Decisions affecting Magna Donnelly “will be driven from Holland,” although they’ll still come from Magna International, which structures all of its business units as wholly owned subsidiaries that operate with a high degree of autonomy, Baumgardner said.
Baumgardner, who will run the new subsidiary from Holland, sees the merger as beneficial from all perspectives. Shareholders will get a good value for their Donnelly stock and see greater liquidity and growth opportunities in the Magna shares they will receive. For customers, the new subsidiary will have greater capabilities than the two companies had separately, Baumgardner said.
As a global market leader, Magna Donnelly also will generate plenty of professional opportunity for workers globally and in Holland, Baumgardner said.
“We’re bigger and stronger in our core area. That almost always yields more job opportunities overall and more opportunities for career growth,” he said. “This coming together is good for all of our stakeholders.
Donnelly Corp., founded in 1905 as a maker of residential mirrors and the No. 2 global producer of automotive mirrors, had a strong future ahead. The company was targeting 10 percent annual growth rate in revenues and earnings growth of 15 percent a year, after undertaking a major restructuring in the last year to cost costs and boost profitability, Baumgardner said.
The deal originated when Donnelly and Magna began talking about “business possibilities.”
Donnelly has long been a supplier of Magna’s, and the two companies have talked numerous times over the years about forging closer ties. The most recent discussions eventually evolved into serious merger talks about six months ago, with Magna coming forward with a “compelling offer that clearly does not make sense to pass up,” Baumgardner said.
“It became really evident there could be some really unique fits between the two companies,” Baumgardner said. “When a really strong offer comes that makes a lot of sense, it makes you say, ‘Hey, it makes a lot of sense to go in another direction.’
“We had a great future. This comes along and it’s more exciting,” he said.