ZF Friedrichshafen to acquire TRW Automotive for USD 12.4 billion
ZF Friedrichshafen to acquire TRW Automotive for USD 12.4 billion
Under the terms of the agreement, ZF will acquire TRW in an all-cash transaction valued at approximately USD 12.4 billion based on equity value. The agreement has been approved by ZF's Supervisory Board and Management Board and TRW's Board of Directors. TRW stockholders will receive USD 105.60 in cash for each share of TRW stock. The transaction is subject to several customary closing conditions, including antitrust and US foreign investment clearance and the approval of TRW's stockholders representing more than 50 % of TRW's outstanding shares. ZF expects the transaction to close in the first half of 2015. Following the closing, TRW will be delisted from the New York Stock Exchange. The combined company will be a global leader in the automotive supplier business with pro forma combined sales of about EUR 30 billion (approx. USD 41 billion) and 138,000 employees. Together, ZF and TRW will be uniquely positioned to benefit from the megatrends of the automotive industry on a global basis. Both companies have acknowledged technology positions in high-growth segments that profit from the megatrends towards fuel efficiency, increased safety requirements and autonomous driving. ZF is a player in driveline and chassis technologies, whereas TRW is a supplier of active and passive safety technologies, including advanced driver assistance systems. Both companies have demonstrated a strong track record based on high product quality and continued innovation for their customers. Globally, pro-forma combined R&D investments (total company funded engineering expenses incl. R&D, ref. to FY 2013) will amount to approximately EUR 1.5 billion (about USD 2.1 billion), making ZF a global leader in R&D. Dr. Stefan Sommer, Chief Executive Officer of ZF, said: "The acquisition of TRW fits perfectly into our long-term strategy. 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. Sommer continued: "This is an acquisition in the spirit of a partnership. We look forward to welcoming TRW's employees to our company and are committed to working closely with them to realize the potential of this exciting combination. The Detroit metro area will remain a major business center for the company, and we expect employees from both companies to benefit from the enhanced career opportunities at a larger, more diversified company. John C. Plant, Chairman and CEO of TRW, said: "We have long respected ZF as a very successful company in our industry with similar values and focus on innovation. 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, all of which will reap the benefits of being part of a larger, more diversified global organization. Our employees have shown admirable dedication in growing TRW into the formidable company it is today, and our strong performance is a testament to their hard work. With the acquisition of TRW, ZF would more than double its sales in two of the most significant countries of the world for automotive sales: China and the USA. ZF has done business in the USA since 1979 and currently operates twelve sites, including a production site for automatic transmission systems in South Carolina that was opened in mid-2013. Through the transaction, ZF would significantly increase its annual sales volume in the USA from EUR 2.8 billion (USD 3.9 billion) to EUR 6.5 billion (USD 9.0 billion). ZF's presence in China, accounting for two thirds of the company's total regional sales of EUR 3 billion (USD 4.1 billion) in Asia-Pacific, would be significantly strengthened as a result of the combination. Together with TRW, which also has a strong presence in China, ZF would achieve a sales volume of EUR 4.0 billion (USD 5.5 billion) in China. Furthermore, the combined company would achieve annual sales of about EUR 5.4 billion (approx. USD 7.5 billion) in the Asia-Pacific region. Both companies have invested heavily into expanding their production footprint over recent years. Further, both have major production sites and strong R&D operations in China: ZF is currently expanding its R&D Center in Shanghai to 800 employees which is a 30 minute drive away from TRW's new R&D facility. The TRW facility will eventually house 1,200 employees, making it TRW's largest R&D site worldwide. The combined group will generate about half of its sales in Europe and half in North America, Asia-Pacific and the rest of the world. The transaction will also lead to a balanced portfolio of customers in both the premium and the volume segments. TRW achieves a large portion of sales in the volume segment and maintains strong relationships with US and European volume manufacturers. ZF possesses a broader customer base and is strong among premium car producers. Further, the combined company will be well positioned to supply car manufacturers in Asia. ZF will remain headquartered in Friedrichshafen, Germany. TRW will be integrated into ZF as a separate business division. No decisions about management responsibilities for the TRW business have been made yet. The companies plan to establish integration teams consisting of balanced representation from both companies to ensure a seamless integration that positions the combined company for accelerated growth while addressing potential challenges for employees and customers. Due to the complementarity of the two companies the main focus will be on growth while cost synergies are expected to be mainly derived from greater purchasing power and sharing best practise standards. Dr. Stefan Sommer added: "The combination makes sense for all of our constituencies: 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. Prof. Dr. Giorgio Behr, Chairman of the ZF Supervisory Board, underlined that "both companies make this step from a position of strength. They have excellent growth prospects. Already in December 2013 ZF had signed an agreement with the Shanghai-listed company Zhuzhou Times New Material Technology Co., Ltd. (TMT) for the sale of its Rubber & Plastics Business Unit.