German auto supplier Mahle on Thursday said it agreed to buy rival Delphi's air conditioning business, to expand its thermal management expertise as cars make greater use of electric motors and batteries which need special cooling.

In a separate statement, Delphi said it had sold the business to Mahle for about $727 million.

Mahle is diversifying as a business that has specialized in manufacturing parts for combustion engines.

In a statement, Mahle CEO Heinz Junker said: "With the acquisition of Delphi's thermal management division, we will reinforce our commitment in this promising field. This step represents an important strategic progression for Mahle."

The business includes thermal compressors as well as heating ventilating and air conditioning (HVAC) modules which can be used to help cool electric car batteries and fuel cells.

Mahle said it would integrate the 13 Delphi plants spread across the globe, as well as development centers in the United States and Luxembourg.

Delphi's Thermal Systems division, which has 7,600 employees, had revenues of around $1.2 billion last year. – Reuters