ZF to acquire Wabco for $7 billion

It's the biggest news in the automotive component industry in the year till now. ZF Friedrichshafen AG, the leading global technology group and supplier of mobility systems for passenger cars, commercial vehicles and industrial technology, today announced that it has entered into a definitive agreement to acquire Wabco for $136.50 per share. The planned acquisition, in an all-cash equity deal totalling US$ 7 billion (Rs 48,314 crore) has been approved by ZF’s Management Board and Supervisory Board and Wabco’s Board of Directors.

ZF, which has had Wabco in its crosshairs since a few years, has finally succeeded in its endeavour. In 2017, there was a failed attempt by the ZF Group to acquire Wabco. This is easily the biggest acquisition after the US$ 12.4 billion deal ZF did to takeover American supplier TRW in 2015. Clearly, consolidation is the name of the game in the component industry, while collaboration gathers pace in the OEM space.

With ZF and Wabco coming together, they will form a leading global integrated systems provider for commercial vehicle technology with combined sales of approximately 40 billion euros (Rs 305,760 crore). The complementary capabilities of both companies will create added value for ZF’s commercial vehicle customers.

Wabco is a leading global supplier of braking control systems, technologies and services that improve safety, efficiency and connectivity of commercial vehicles including trucks, buses and trailers. Its diverse products and services include integrated braking systems and stability control, air suspension systems, transmission automation controls, as well as aerodynamics, telematics, and fleet management solutions. Wabco generated 3.3 billion euros (Rs 22,932 crore) in revenues in 2018 and has around 16,000 employees in 40 countries.

Commenting on the planned acquisition, Wolf-Henning Scheider, CEO of ZF, said: “We believe that, together with Wabco, ZF can form the world’s leading integrated systems provider for commercial vehicle technology, creating long-term value and security for its customers, employees and owners. For ZF the acquisition of a specialist and leader for commercial vehicle braking systems means adding a stable and growing business segment and enables our existing commercial vehicle division to expand its expertise in vehicle dynamics control. This will create the foundation for ZF to offer comprehensive systems for safe and automated mobility solutions for passengers and goods to our customers.”

Jacques Esculier, chairman and CEO of Wabco, said: “Joining forces with highly respected ZF will create a leading global technology company well positioned to capitalise on future demand for autonomous, efficient and connected commercial vehicles. We have a long history of successful collaboration to develop innovative technologies with ZF with both companies sharing an uncompromising drive for excellence, passion for innovation, and exceptional customer focus.”

Combination of successful and complementary business lines
The planned acquisition is part of ZF’s Next Generation Mobility strategy and will expand the company’s expertise to include commercial vehicle braking solutions for the first time. This plays a central role for the control of automated driving functions – including emergency braking manoeuvres of trucks and trailers.

Following the acquisition, customers of both companies will have a partner in ZF who can offer them a fully integrated system approach, new drive systems for e-mobility and autonomous driving functions. ZF expects that automated driving functions will primarily be implemented for commercial vehicles and in areas with low complexity and traffic (e.g. factory sites, airports, agriculture). The combination of both businesses is expected to further accelerate the development of new technologies to enable autonomous commercial vehicle functions, making ZF less dependent on the economic cycle of the passenger car industry.

ZF says the planned strategic acquisition of Wabco is consistent with its goal to develop and deliver technology solutions that make cars and commercial vehicles see, think and act in order to reduce emissions and increase road safety. While ZF already has sensor systems and computing technology for its ‘see’ and ’think’ competence, together with Wabco, ZF which is already a leading supplier in the area of steering and driveline technology, will in future be completing the portfolio for commercial vehicle technologies to offer solutions to allow vehicles to ‘act’.

Dr. Konstantin Sauer, CFO of ZF, said: “The intended strategic acquisition of Wabco comes at a good time for ZF. Following the successful integration of TRW, ZF has significantly reduced its debt levels. In fact, we overachieved in delivering our debt reduction targets. Wabco is a healthy and growing company with a strong cash flow profile that makes it a seamless fit with ZF and supports the implementation of our strategy.”

ZF, which is a global leader in driveline and chassis technology as well as active and passive safety technology, expects to close the transaction in the beginning of 2020. The company has a global workforce of 146,000 with approximately 230 locations in some 40 countries. In 2017, ZF achieved sales of 36.4 billion euros (Rs 278,241 crore). The company invests more than six percent of its sales in research and development annually.

Also read: Helmut Ernst: ‘ZF has decided that India, besides China and ASEAN, should be a hub on its own.’

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