Deals driverAutomotive trends & transactions in Canada

June 2016

kpmg.ca/automotive

http://kpmg.ca/automotive

Canadian automotive M&A activity

Since our last report, capital markets have recovered and we expect merger and acquisition activity in the automotive sector to remain strong, but not without disruption.

Growing consumer confidence

The TSX and DOW have shown improvement over the last six months, which has sustained consumer confidence. Strong automotive retail sales volumes are driving stronger production volumes. Consumers are also benefiting from more favorable credit terms and leasing conditions, which have made it easier for purchasers to acquire new vehicles.

New entrants into the OEM market

A lower Canadian dollar could be driving manufacturers to increase their re-shoring of production. The demand for connectivity may also drive mobile service technology companies into acquiring Tier 1 OEM suppliers as they look to

Valuations of publicly-traded automotive companies (ranked by enterprise value in Canadian dollars)

Source: Capital IQ, as of June 2, 2016

Capitalization LTM multiples NTM multiples

Company Country Market cap.Enterprise Value (EV)

EV/EBITDA EV/EBIT P/E

EV/ EBITDA EV/EBIT P/E

Ford Motor Co. United States 68,132 53,714 2.4x 4.3x 6.1x 3.0x 5.0x 6.4x

General Motors Company United States 61,380 51,836 2.6x 5.0x 4.5x 2.2x 3.3x 5.3x

Tesla Motors, Inc. United States 41,899 44,447 n.m. n.m. n.m. n.m. n.m. n.m.

Johnson Controls Inc. United States 37,955 48,083 11.4x 15.5x n.m. 8.9x 11.4x 10.9x

Magna International Inc. Canada 20,966 24,863 5.7x 8.0x 8.1x 5.0x 7.1x 7.5x

Harley-Davidson, Inc. United States 10,951 11,411 6.4x 7.5x 12.2x 6.4x 7.6x 11.2x

The Goodyear Tire & Rubber Company United States 9,525 16,300 5.3x 7.6x 27.8x 4.6x 6.1x 6.8x

BorgWarner Inc. United States 9,548 12,497 6.9x 9.1x 12.9x 6.3x 8.5x 10.3x

Lear Corp. United States 11,338 12,469 5.5x 6.9x 10.6x 5.2x 6.5x 9.0x

Gentex Corp. United States 6,147 5,599 7.8x 9.1x 15.1x 7.0x 8.3x 13.6x

Federal-Mogul Holdings Corporation United States 1,835 5,724 7.2x 16.2x n.m. 5.9x 13.0x 8.0x

Tenneco Inc. United States 3,937 5,407 5.3x 7.0x 12.3x 4.8x 6.4x 9.0x

Linamar Corp. Canada 3,517 4,909 5.5x 8.1x 7.8x 4.7x 6.7x 7.0x

Nexteer Automotive Group Limited United States 3,207 3,555 6.2x 8.0x 11.2x 5.3x 7.6x 10.3x

Metaldyne Performance Group Inc. United States 1,440 3,665 5.6x 10.2x 9.4x 5.4x 10.1x 9.0x

Dana Holding Corporation United States 2,321 3,455 4.5x 6.3x 13.4x 4.1x 5.8x 7.0x

Thor Industries Inc. United States 4,440 4,179 7.7x 8.6x 13.8x 7.5x 8.4x 13.2x

American Axle & Manufacturing Holdings Inc. United States 1,653 3,110 4.2x 6.4x 5.3x 4.0x 6.3x 5.4x

Visteon Corporation United States 3,294 2,940 8.4x 11.6x 1.4x 6.8x 9.5x 19.8x

Cooper Tire & Rubber Co. United States 2,289 2,169 2.9x 3.7x 7.8x 3.6x 4.8x 8.2x

Cooper-Standard Holdings Inc. United States 1,935 2,561 5.2x 7.4x 12.3x 5.0x 7.9x 10.7x

Gentherm Incorporated United States 1,771 1,723 8.5x 10.7x 15.7x 7.6x 9.6x 13.9x

Dorman Products, Inc. United States 2,460 2,345 10.5x 11.7x 19.9x 10.0x 11.0x 18.4x

Drew Industries Incorporated United States 2,483 2,511 10.3x 13.3x 21.1x 8.3x 11.3x 17.5x

Martinrea International Inc. Canada 778 1,501 4.7x 8.0x 7.1x 4.1x 6.7x 5.3x

Valuation multiples summaryGroup Average 6.3x 8.8x 11.6x 5.7x 7.9x 10.1x

Group Median 5.6x 8.0x 11.7x 5.2x 7.6x 9.0x

Group Maximum 11.4x 16.2x 27.8x 10.0x 13.0x 19.8x

Group Minimum 2.4x 3.7x 1.4x 2.2x 3.3x 5.3x

broaden their market penetration on a per dollar basis for OEM installed vehicle components.

The U.S. elections

The results of this Novembers U.S. elections could have a significant impact on the ultimate shape of the Trans-Pacific Partnership agreement (TPP). As opposition to the TPP and free trade agreements grows, we may see adjustments leading to more North American content requirements in the auto industry. These higher levels of content may also increase the export cost for goods exported to other TPP countries. The agreement is perceived as picking some winners and losers as other industries may seek their own accommodations. Ultimately, an increase in protectionism could lead to an increase in the value of North American automotive suppliers in the near term if domestic industrial production increases.

2016 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

18.0x

20.0x

22.0x

24.0x

Harley-DavidsonMagnaJohnson ControlsGMFord

Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16

EV/L

TM

EB

ITD

AAutomotive EV/LTM EBITDA performance (Last 3 years)

Source: Capital IQ

Source: Capital IQ

Canadian M&A activity in the automotive sector (any Canadian involvement)

$CAD millions Valuation Multiples

Target Acquirer Country of target Closed date EV

EV/LTM sales

EV/LTM EBITDA

2016: Top 10 transactions

GETRAG Getriebe- und Zahnradfabrik Hermann Hagenmeyer GmbH & Cie KG Magna International Inc. Germany 4-Jan-16 3,455 1.4x n.a

Affinia Group Holdings Inc. Mann + Hummel Holding GmbH United States 4-May-16 1,749 n.a n.a

Montupet SA Linamar Corp. France 18-Jan-16 1,233 1.7x 9.1x

Fuel Systems Solutions, Inc. Westport Innovations Inc. United States 1-Jun-16 68 0.2x (6.1)x

AFX Industries L.L.C. Exco Technologies Limited United States 5-Apr-16 107 n.a n.a

General Cable Corporation, Automotive Ignition Wire Business Standard Motor Products Inc. United States 27-May-16 93 0.7x n.a

Spectra Premium Industries Inc. Caisse de dpt et placement du Qubec; Fondaction Canada 19-Apr-16 - n.a n.a

Laydon Composites Ltd. WABCO Holdings Inc. Canada 15-Apr-16 40 1.6x n.a

Jiffy-tite Company Inc. Oetiker Limited United States 1-Mar-16 - n.a n.a

Drake Automotive Group, Inc. Huron Capital Partners, LLC United States 11-Jan-16 - n.a n.a

2015: Top 10 transactions

ZF TRW Automotive Holdings Corp. ZF Friedrichshafen AG United States 15-May-15 14,472 0.8x 7.3x

Veyance Technologies, Inc. ContiTech AG United States 30-Jan-15 2,110 0.9x 7.1x

Stackpole International Inc.

Johnson Electric International (UK) Limited; JE International Engineered Products Canada Limited; JE International Powder Metal Canada Limited

Canada 27-Oct-15 867 1.8x 10.6x

Magna Interiors Inc. Grupo Antoln Irausa, S.A. Canada 31-Aug-15 641 0.2x n.a

Motor Coach Industries International, Inc. New Flyer Industries Inc. United States 18-Dec-15 604 0.7x n.a

iBiquity Digital Corporation DTS Inc. United States 1-Oct-15 814 12.7x 73.1x

SEISSENSCHMIDT GmbH Linamar Corp. Germany 15-Jan-15 - n.a n.a

Lithium Americas Corp. Western Lithium USA Corporation (nka:Lithium Americas Corp.) Canada 4-Sep-15 77 n.a (15.0)x

SpectAL Industries, Inc. Lippert Components, Inc. Canada 24-Apr-15 27 0.9x n.a

Veyance North-American Air Spring Business Unit

Garlock of Canada Ltd.; Stemco Kaiser Incorporated; EnPro Luxembourg Holding Company S.a.r.l.

United States 1-Jul-15 22 n.a n.a

2016 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

For the latest in Automotive industry publications, webcasts, and more please visit

Contact us

kpmg.ca/automotive

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

2016 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. 13228

The KPMG name and logo are registered trademarks or trademarks of KPMG International.

For more information on how our Automotive industry group can help you, contact one of the following KPMG in Canada professionals

http://kpmg.ca/automotivehttps://linkedin.com/company/kpmg-canadahttps://twitter.com/kpmg_canadahttp://www.youtube.com/kpmgcanadahttp://www.google.com/+KpmgCa

Area: 0: Toronto1: Southwestern Ontario

First and last name: 0: 0: Peter Hatges1: Bob Jolicoeur

1: 0: Doug Dawdy

Servive line: 0: 0: National Sector Leader, Automotive1: National Industry Leader,1_a: Industrial Markets1_b: National Sector Leader, Chemicals

1: 0: Partner, Deal Advisory

Telephone: 0: 0: T: 416-777-36141: T: 416-777-3733

1: 0: T: 519-747-8807

Email: 0: 0: E: phatges@kpmg.ca1: E: bjolicoeur@kpmg.ca

1: 0: E: ddawdy@kpmg.ca