Mahle GmbH agreed to buy Delphi Automotive plc’s thermal business for about $727 million in cash to expand the German auto-component maker’s technology offerings for combustion engines, electric cars and fuel-cell vehicles.

Mahle will integrate 13 plants in Europe, the Americas and Asia plus development centers in the U.S. and Luxembourg into its global network, and will acquire Delphi’s stake in a related joint venture in China in a second step, the Stuttgart-based manufacturer said in a statement on Thursday.

“This step represents an important strategic progression for Mahle,” Chief Executive Officer Heinz Junker said in the statement.

Closely held Mahle has a workforce of 66,000 employees at 150 production sites worldwide and posted about 10 billion euros ($11.4 billion) in revenue last year. Delphi, which has its official headquarters in Gillingham, England, and main operating base in Troy, Michigan, said the thermal unit, which makes automotive cooling systems, generated $1.6 billion in sales last year. That includes revenue from the Chinese venture.

Mahle develops and manufactures components including piston systems, cylinder parts, valve train, air management and liquid management systems for global carmakers. The Delphi transaction complements Mahle’s acquisition of a controlling stake in German automotive supplier Behr GmbH two years ago from the owner’s family.

Delphi and Mahle are targeting completion of the deal in the third quarter. Delphi said it will use the proceeds from the sale for “growth initiatives,” including acquisitions and share buybacks.

In September, Delphi bought Unwired Technology LLC, a designer of wireless headphones for automotive entertainment systems, as well as Antaya Technologies Corp., a manufacturer and wholesaler of on-glass electrical connectors.

Barclays plc was Delphi’s financial adviser for the transaction and Latham Watkins LLP was its legal counsel. Citigroup Inc. was Mahle’s financial adviser.

Additional reporting by Anthony Noto.

Subscribe Now

Complete access to real-time information and analysis of news and trends in the industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.