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ZF to purchase TRW for $105.60 a share

German partsmaker ZF Friedrichshafen has reached a deal to buy U.S.-based TRW Automotive Holdings for $105.60 a share, completing a supply chain megadeal that has been in the works since mid-July.The transaction will create the world’s second-largest auto supplier with pro forma combined revenue of about  €30 billion ($41 billion) and 138,000 employees, ZF and TRW said in separate statements.

Under the terms of the agreement, ZF said it will acquire TRW in an all-cash transaction valued at approximately $12.4 billion based on equity value. In its release, TRW said ZF would acquire all of its outstanding shares in a deal valued at approximately $13.5 billion on an enterprise value basis.

ZF’s share price offer is a premium of 16 percent over the U.S. company’s closing price on July 9, before news of ZF’s buyout interest emerged.

The price represents a multiple of 7.6 times TRW’s earnings before interest, tax, depreciation and amortization for the year ended June 2014, making it one of the most expensive takeovers in the auto parts sector.

The deal, which still requires approval from the TRW stockholders at a special meeting, is expected to be finalized by the first quarter of 2015.

“The combined company will be well positioned to capitalize on favorable megatrends in the automotive industry by bringing together complementary product offerings and leading technology positions that serve high-growth areas such as fuel efficiency, increased safety requirements, and autonomous driving,” the statement said.

 

TRW will be operated as a separate business division within ZF, the statement said.

 “We have long respected ZF as a very successful company in our industry with similar values and focus on innovation,” TRW CEO John Plant said in a statement. “This transaction provides significant benefits for our shareholders who will receive full and certain value for their shares, as well as for our employees, customers and communities, all of which will reap the benefits of being part of a larger, more diversified global organization.”

 

ZF CEO Stefan Sommer said the acquisition fits perfectly into the German supplier’s long-term strategy. “The transaction combines two highly successful companies that have remarkable track records of innovation and growth and solid financial positions,” he said. “We are strengthening our future prospects by enlarging our product portfolio with acknowledged technologies in the most attractive segments.”

Earlier, ZF said it will sell its stake in a joint venture to partner Robert Bosch, a deal that paves the way for ZF to buy TRW.

Bosch will purchase ZF’s half of a steering-systems manufacturer for an undisclosed amount, increasing its stake to 100 percent from 50 percent in ZF Lenksysteme, Bosch said in a statement today.

ZF Lenksysteme was formed in 1999 and had  €4.1 billion ($5.3 billion) in sales last year.

Bosch, which is the world’s largest parts supplier, did not disclose financial terms of the deal. ZF may get $1.75 billion to $2 billion for its 50 percent stake, according to an estimate by Bloomberg Intelligence analysts.

ZF first said July 10 it was in early-stage buyout talks with U.S. auto parts supplier TRW.

Unraveling the Bosch partnership allows ZF to avoid antitrust issues in the purchase of the U.S. company, which also has a large steering-systems business.

 Bosch said that taking full control of ZF Lenksysteme will help extend its reach in driver-less technology. The venture is “a technological leader in the growth area of electric power steering, and precisely this is the core technology for automated driving, for more efficient vehicles, and also for electric cars,” Bosch CEO Volkmar Denner said in the statement. With the deal, “Bosch is strengthening its ability to actively shape the future of mobility.”

 

In a conference call on Monday to discuss the deal Denner said Bosch hopes to complete the acquisition of by early 2015.

TRW, based in Livonia, Michigan, makes airbags, electronics, and braking and steering equipment for cars globally and sells to nearly all major automakers including Ford and General Motors.

 In a separate statement, Sommer said: “In order to continue to be able to meet the demands of an ever more dynamic business environment, Bosch and ZF have decided to change the ownership structure of ZFLS.”