ZF Frie-drichshafen AG and TRW Automotive Holdings Corp. last Tuesday announced that they have entered into a definitive agreement under which ZF will acquire TRW. The combined company will be a global leader in the automotive supplier business with pro forma combined sales of about 30 (US$ 39) billion and 138,000 employees.
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 an important player in driveline and chassis technologies, whereas TRW is a significant supplier of active and passive safety technologies, including advanced driver assistance systems.
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 part-nership. We look forward to welcoming TRWs 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 United States.
ZF has done business in the U.S. since 1979 and currently operates 12 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 U.S. from 2.8 billion to 6.5 billion.
ZFs presence in China, accounting for two thirds of the companys total regional sales of 3 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 4.0 billion in China. Furthermore, the combined company would achieve annual sales of about 5.4 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 TRWs new R&D facility. The TRW facility will eventually house 1,200 employees, making it TRWs 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. 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.
Under the terms of the agreement, ZF will acquire TRW in an all-cash transaction valued at approximately US$ 12.4 billion based on equity value. The agreement has been approved by ZFs Supervisory Board and Management Board and TRWs Board of Directors. TRW stockholders will receive US$ 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 TRWs stockholders representing more than 50 percent of TRWs 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.
With 2013 sales of $17.4 billion, TRW Automotive ranks among the world's leading automotive suppliers. Headquartered in Livonia, Michigan, USA, the Company, through its subsidiaries, operates in 24 countries and employs approximately 65,000 people worldwide. TRW Automotive products include integrated vehicle control and driver assist systems, braking systems, steering systems, suspension systems, occupant safety systems (seat belts and airbags), electronics, engine components, fastening systems and aftermarket replacement parts and services.
Based in Friedrichshafen, Germany, ZF is a global leader in driveline and chassis technology with 122 production companies in 26 countries. In 2013, the Group achieved a sales figure of 16.8 billion with approximately 72,600 employees. ZF is one of the ten largest automotive suppliers worldwide.
