ZF Friedrichshafen AG agreed to buy TRW Automotive Holdings Corp. in a long-expected deal reportedly worth about $11.7 billion, and seen as establishing a new giant in global auto parts manufacturing. The buyer stressed the two firms have complementary product lines: ZF produces driveline and chassis technologies; TRW develops active and passive safety technologies, including advanced driver assistance systems.
Together, the two companies have total annual sales estimated at over $38.8 billion, and 138,000 employees worldwide.
"The acquisition of TRW fits perfectly into our long-term strategy,” according to Stefan Sommer, CEO of the ZF group. “The transaction combines two highly successful companies that have remarkable track records of innovation and growth and solid financial positions. We are strengthening our future prospects by enlarging our product portfolio with acknowledged technologies in the most attractive segments."
ZF is proposing an all-cash transaction, paying TRW shareholders $105.60 per share. The purchase agreement has been approved by ZF's supervisory and management boards and TRW's board of directors.
The buyer noted the transaction has yet to achieve regulatory clearances, but it indicated it expected to complete the takeover in early 2015.
The new organization would have TRW installed as a separate business division of ZF. The consolidation of the two companies would be focused on “cost synergies” to be derived by enhanced purchasing power and sharing “best practices,” ZF stated, and no decisions have been made about management responsibilities for the TRW business, it added.
The combined company would generate about half of its sales in Europe and half in the rest of the world. The ZF organization has 12 manufacturing sites in North America, including a new automatic transmission system complex in South Carolina, an axle drives plant in Michigan, and chassis components plants in Alabama, Michigan, and the Carolinas.
ZF emphasized that adding TRW’s operations to its portfolio would “more than double” its sales in the U.S. and Chinese markets. In addition, both companies have been investing to expand production capacity recently, and both companies have significant R&D operations in the Shanghai area.
"The combination makes sense for all of our constituencies,” the ZF CEO added. “Customers of both companies will have access to a broader offering under one roof and employees from ZF and TRW will enjoy enhancements that result from the combined organization. TRW stockholders will receive an attractive valuation and our own shareholders - the Zeppelin and Ulderup foundations - will benefit from improved future prospects and diversification of the combined company."