ZF Friedrichshafen AG and TRW Automotive Holdings Corp have announced that they have entered into a definitive agreement under which ZF will acquire TRW.
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 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 percent of TRW’s outstanding shares. ZF expects the transaction to close in the first half of 2015.
The combined company will be a global leader in the automotive supplier business with pro forma combined sales of about € 30 billion (approx. US$ 41 billion/Rs 237,240 crore) 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 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. 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 € 1.5 billion (about US$ 2.1 billion), making ZF a global leader in R&D.
Stefan Sommer, CEO 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.”
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.”
US and China sales volumes to more than double
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 US 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 (US$ 3.9 billion) to € 6.5 billion (US$ 9.0 billion).
ZF’s presence in China, accounting for two-thirds of the company’s total regional sales of € 3 billion (US$ 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 € 4.0 billion (US$ 5.5 billion) in China. Furthermore, the combined company would achieve annual sales of about € 5.4 billion (approx. US$ 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.
TRW to become a separate business division of ZF
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.
Photograph: ZF is primarily known for automatic transmissions. The volume production of the worldwide first 9-speed automatic transmission for vehicles with front-transversal engine design started in 2013.