Automotive safety company Takata has signed a definitive agreement to sell nearly all of its operations to rival Key Safety Systems for $1.59 billion as part of its bankruptcy reorganization.
The proceeds from the sale will be used to cover legal costs resulting from the exploding airbag scandal that drove Takata into Chapter 11 in June. The deal does not include the problematic ammonium nitrate airbag inflator business, which will be run by the reorganized Takata and eventually will be wound down.
“We are very pleased to have reached this agreement with KSS, which is an important step toward the consummation of our sale and achieving the objectives we identified at the outset of this process,” Takata CEO Shigehisa Takada said in a news release.
“We believe that the combined business will be well positioned for long-term success in the global automotive industry,” he added.
Chinese-owned Key Safety beat out nearly a half dozen competitors to win a stalking horse bid to acquire Takata out of bankruptcy. The companies said the acquisition will create a global leader in the automotive safety business with pro forma combined sales of approximately $7 billion and roughly 60,000 employees in 23 countries.
“The combined company will enhance our ability to serve customers globally and provide superior products and innovation in the rapidly evolving auto safety industry,” Key Safety CEO Yuxin Tang said.
Takata, which started out as a textile manufacturer more than 80 years ago, filed bankruptcy with spiraling debts estimated at more than $9 billion. Its faulty airbag inflators resulted in the recall of tens of millions of vehicles and been linked to 11 deaths in the U.S. and several others elsewhere.
The company has admitted to manipulating and withholding key information about the faulty inflators for years, even after they started exploding in people’s cars.
The sale to KSS still requires approval from a bankruptcy judge and federal regulators, including the Committee on Foreign Investment in the U.S., which has jurisdiction because of Key Safety’s ownership by China’s Ningbo Joyson Electronics.