Clearlake sells auto-seat maker Futuris to Adient after buy-and-build

  • Clearlake carved out Futuris from Australia’s Elders
  • Bet on increasing importance of auto interiors in era of self-driving cars
  • Turnaround included two add-ons

Clearlake Capital Group’s sale of automotive-seating supplier Futuris, for which Adient has agreed to pay about $360 million, represents a handsome return on a bet placed four years ago.

Clearlake carved out Futuris from Elders Ltd, an Australian conglomerate that was selling off peripheral businesses in the face of financial difficulty in 2013.

At the time, the strength of the Australian dollar was hurting the country’s manufacturing sector. When General Motors and Ford said they would exit the Australian market, it was a blow to Futuris, as those were its two largest customers. But Clearlake saw the company as an underappreciated asset.

According to a person with knowledge of the firm, Clearlake’s investment thesis posited that auto-industry developments would increase the importance of a car’s interior to the consumer’s buying decision. In particular, autonomous-vehicle technology might soon shift attention away from the engine, which defines the driving experience, to features that determine the comfort level of passengers.

Futuris, Oak Park, Michigan, had more than 100 engineers skilled in seat design, a specialized and highly regulated area of automotive engineering. Clearlake also saw value in the company’s remaining customer base, which included Tesla.

At the time, Elon Musk’s company was selling fewer than 20,000 cars per year, but there was potential for significant growth, given the excitement surrounding electric cars. In all, it was a turnaround opportunity that seemed to fit well with the firm’s capabilities. Clearlake agreed to acquire Futuris for around $62 million.

In partnership with operating advisers Joe Gorga and Merv Dunn, Clearlake restructured Futuris’s operations, ramping down Australian operations and transitioning to North America and Asia. There were two add-on acquisitions, CNI Enterprises and Kongsberg Automotive’s North American headrest and armrest business.

Clearlake’s sale of Futuris was a limited process. Only strategic buyers were considered, and Adient early on demonstrated an interest in locking down the deal. According to Baird Equity Research, “The transaction has several worthwhile merits” for Adient, including a “fast-growing North America business…, strong profitability … and attractive free cash flow.” The deal is expected to close Sept. 30.

Action Item: Contact Futuris: +1 248-439-7800

Photo sourced from Futuris website.