|Not much of a premium here on a huge deal- a 2% premium to its Friday closing price of $103.85|
Germany's ZF to buy TRW Automotive for $12.4B
Brent Snavely , Detroit Free Press 4:24 p.m. EDT September 15, 2014
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In a deal that would create the world's second largest automotive supplier, Germany's ZF Friedrichshafen agreed to buy Livonia, Mich.-based TRW Automotive for approximately $12.4 billion
Together, the two automakers have combined annual sales of more than $41 billion and about 138,000 employees. ZF Group manages its North American operations out of its Northville, Mich., office.
"The major motivation for this transaction is technology driven and to serve some markets especially in the field of electro-mobility and in the field of autonomous driving," ZF CEO Stefan Sommer said in a conference call. "The combined company has greater scale and power in the world and with combined technological know how … we expect more power, more competitiveness."
The only auto supplier larger than the potential combination of ZF Group and TRW Automotive is another German supplier, Robert Bosch.
The companies said that TRW Automotive Holdings will be a separate division within ZF -- best known as a maker of transmissions.
However, Stephanie Brinley, senior analyst for IHS Automotive, said, "I would expect to see that a lot of that activity would be combined over time. It's not going to stay separate for the long term."
The agreement has been approved by ZF's Supervisory Board and Management Board and TRW's Board of Directors. The deal is expected to close during the first half of 2015.
ZF will pay $105.60 per TRW share, a 2% premium to its Friday closing price of $103.85. The companies put the transaction's value at about $13.5 billion.
Shares of TRW closed down 81 cents, or 0.78%, at 103.04 on Monday. But so far this year, TRW's stock has increased about 40% from $73.64 on Jan. 2.
ZF CFO Konstantin Sauer said the company has received financing commitments from Citigroup and Deutsche Bank and is talking to additional banks that may become part of the deal. ZF said it expects to reduce its financial leverage significantly again in the coming years.
"We have long respected ZF as a very successful company in our industry with similar values and focus on innovation," John C. Plant, CEO of TRW said in a statement. "This transaction provides significant benefits for our shareholders who will receive a full and certain value for their shares, as well as for our employees, customers and communities."
The deal also will bring together two very different companies. ZF Group is best known for its transmissions,but also makes steering systems, axles, clutches and shock absorbers. TRW makes airbags, seat belts, steering wheels, brakes, brake systems and other electronics.
"This is a complementary — not a synergistic deal," Sommer said. "It's for me very, very important to have the best fit situation in all markets. And this is what the (automakers) require with the worldwide platforms with the shorter life cycle of cars."