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Auto parts giant Magna International Inc. will purchase U.S. peer Donnelly Corp. in a friendly all-stock deal worth $320-million (U.S.), the companies said Tuesday.

Holland, Mich.-based Donnelly makes window systems, interior and exterior mirror systems and interior and lighting systems. Last year, it rung up about $850-million in sales.

Magna, based in Aurora, Ont., said it will give Donnelly shareholders the equivalent of $28 worth of Magna stock - a 38-per-cent premium over Donnelly shares' Monday closing price of $20.22 on the New York Stock Exchange.

However, Magna noted, that price tag is subject to change if Magna shares fall out of a 20-day average price band of $61 and $80 on the New York Stock Exchange. That range will be finalized on the day before its closing, Magna said.

Shares of Magna fell 62 cents (Canadian) to $100.50 on the Toronto Stock Exchange and were down 50 cents (U.S.) to $66.01 on the NYSE. Donnelly shares shot up $6.78 or 33.5 per cent to $27.00 in morning trade.

Under terms of the pact, Donnelly will become a wholly owned subsidiary of Magna, the companies said. The new division, to be called Magna Donnelly, will have annualized sales of more than $1.2-billion and will be led by Dwane Baumgardner, currently Donnelly's chairman and chief executive officer.

The deal, which also includes the assumption of $95-million in debt, is expected to close toward the end of September. It is subject to approval from regulators as well as two-thirds of Donnelly shareholders. The vote appears to be a non-issue as Magna said that it has already entered into an agreement with 72 per cent of Donnelly's shareholders.

Purchase 'consistent' with strategy "The combination of our mirrors business with Donnelly is consistent with Magna's strategy of being a leader in the segments of the automotive industry in which we compete," Belinda Stronach, Magna's president and CEO, said in a statement.

"The complementary nature of both businesses from a geographic, operating and customer perspective is expected to achieve significant synergies. Additionally, Donnelly brings significant technology capabilities applicable not only to mirrors but to a wider range of automotive electronics," she added.

In April, Donnelly posted first-quarter net income of $3.4-million or 32 cents a share, reversing a $100,000 loss in its year-earlier quarter. Sales, however, slipped to $211-million from $220-million.

Last month, Magna raised its profit forecast for 2002, unveiled plans to spin off its Magna Steyr vehicle assembly division this fall and forecast that it will double yearly sales to $20-billion by 2006.

First-quarter profit, Magna said in May, jumped to $153-million or $1.65 a share from $144-million or $1.54 a year earlier. Sales rose 9 per cent to $3.12-billion from $2.86-billion.

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