BorgWarner and Delphi Technologies today announced that they have entered into a definitive transaction agreement under which BorgWarner will acquire Delphi Technologies in an all-stock transaction that values Delphi Technologies’ enterprise value at approximately $3.3 billion (Rs 23,516 crore).
The transaction is expected to close in the second half of 2020, subject to approval by Delphi Technologies’ stockholders, the satisfaction of customary closing conditions and receipt of regulatory approvals.
Following the closing of the transaction, the combined company will be led by Frederic Lissalde, BorgWarner’s President and CEO, and Kevin Nowlan, BorgWarner’s CFO, and will operate as BorgWarner. The combined company will be headquartered in Auburn Hills, Michigan.
The acquisition would strengthen BorgWarner’s power electronics products, capabilities and scale. The move is consistent with BorgWarner’s evolution towards the propulsion market of the future and would enable it to maintain flexibility across combustion, hybrid, and electric propulsion (C-H-E).
Under the agreement, which has been approved by the boards of directors of both companies, Delphi Technologies stockholders would receive a fixed exchange ratio of 0.4534 shares of BorgWarner common stock per Delphi Technologies share. Upon closing of the transaction, current BorgWarner stockholders are expected to own approximately 84 percent of the combined company, while current Delphi Technologies stockholders are expected to own approximately 16 percent.
In fiscal year 2019, BorgWarner and Delphi Technologies estimate that they generated $10.17 billion (Rs 72,471 crore) and $4.36 billion (Rs 31,069 crore) of net sales, respectively.
After completion of the move, the combined company is expected to be one of the leading pure-play propulsion supplier globally, serving light and commercial vehicle manufacturers and the aftermarket. The combined company would offer a unique, more comprehensive portfolio of propulsion products and systems across combustion, hybrid and electric, resulting in greater content per vehicle relative to BorgWarner today.
Frederic Lissalde, president and CEO, BorgWarner said: “This exciting transaction represents the next step in BorgWarner’s balanced propulsion strategy, strengthening our position in electrified propulsion as well as our combustion, commercial vehicle and aftermarket businesses. Delphi Technologies will bring proven leading power electronics technologies, talent and scale that will complement our hybrid and electric vehicle propulsion offerings. As a combined company, we look forward to delivering enhanced solutions to our customers while driving increased value for our stockholders.”
“We have a great deal of respect for Delphi Technologies’ team around the world and look forward to welcoming them to BorgWarner. We are confident that together we will be able to move faster to address market trends toward electrification,” added Lissalde.
Richard F Dauch, CEO, Delphi Technologies said: “This is a compelling transaction that we are confident delivers clear benefits to our stakeholders. Delphi Technologies’ portfolio is highly complementary to BorgWarner’s, and together we plan to create a pioneering propulsion technologies company uniquely equipped to serve OEMs and aftermarket customers around the world. BorgWarner’s team shares our focus on addressing today’s and tomorrow’s challenges, and the combination will create exciting opportunities for our employees. We also expect our stockholders will benefit from the opportunity to participate in the future growth and upside potential of the combined company.”
Achieving greater synergies
The acquisition will benefit both companies both strategically as well as financially. BorgWarner will strengthen its power electronics products, capabilities and scale, creating a leader in electrified propulsion systems and will be take advantage of future propulsion migration. Delphi Technologies brings leading power electronics technology and talent, with an established production, supply and customer base. The combined company would offer customers a suite of integrated and standalone offerings of power electronics products (including high voltage inverters, converters, on-board chargers and battery management systems) and capabilities (including software, systems integration and thermal management).
Enhance BorgWarner’s combustion, commercial vehicle and aftermarket businesses. Adding Delphi Technologies’ commercial vehicle and aftermarket business results in more balance across light vehicles, commercial vehicles and the aftermarket.
BorgWarner expects the combined company to realise run-rate cost synergies of approximately $125 million (Rs 890 crore) by 2023 driven primarily by SG&A and procurement savings. These savings will be incremental to Delphi Technologies’ and BorgWarner’s existing cost reduction plans. In addition, BorgWarner expects significant long-term revenue synergies primarily from the opportunity to offer more integrated electrified products, creating further value for the combined company’s stockholders.
BorgWarner's board of directors have also authorised a share repurchase program of up to $1 billion (Rs 7,126 crore) to be executed over the next three years.