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ZF Friedrichshafen AG agreed to buy TRW Automotive Holdings Corp. for $11.7 billion, creating a company big enough to push back against pricing pressure from the largest automakers.
With the deal, ZF is in position to leap ahead of Japan’s Denso Corp. and Germany’s Continental AG to become the world’s second-largest maker of auto parts, trailing only Robert Bosch GmbH. The deal will combine ZF’s transmissions with TRW’s electronics, allowing the group to offer automakers larger packages of components.
“The combined companies are clearly going to have a lot of scale and depth,” Joseph Spak, an analyst for RBC Capital Markets in New York, said in an interview. “They’re combining a number of key technologies as the world is moving toward autonomous driving.”
The transaction gives the Friedrichshafen, Germany-based manufacturer access to TRW’s technology -- from air bags to collision sensors -- that keeps drivers secure and helps them avoid crashes. Consumer demand and government regulations are spreading the adoption of such features to prevent accidents and protect passengers and pedestrians.
Scale and a wide-ranging product offering are vital to compete in the car-parts industry as suppliers need to be “big and powerful,” ZF Chief Executive Officer Stefan Sommer said today on a conference call with reporters.
ZF will pay $105.60 a share in a deal approved by both companies’ boards, the Livonia, Michigan-based company said today in a statement. The offer is 16 percent higher than TRW’s closing price in New York on July 9, the day before Bloomberg News reported ZF’s interest in the takeover. TRW has 111.2 million shares outstanding, according to its Web site.
TRW shares declined as much as 1.4 percent to $102.41 and were down 0.8 percent at 11:53 a.m. in New York trading. ZF shares aren’t traded.
The two companies have total parts sales of about $41 billion, giving the combination more weight to negotiate contracts with automakers such as Italy’s Fiat SpA or General Motors Co.
Gaining that scale involved ZF’s plan to sell its 50 percent stake in a steering-systems joint venture to Bosch. That agreement, which was also announced today, facilitated the bid for TRW by providing funds and clearing a potential antitrust hurdle because of TRW’s own steering unit. Bosch, which gains control of key technology for driverless cars in the process, said it didn’t let the potential of helping create a major rival get in the way of talks with ZF.
“We like competition,” Bosch CEO Volkmar Denner said today on a conference call with reporters. “We have no problem” with ZF’s ambitions.
TRW, whose biggest customer is Volkswagen AG, has rebounded from the U.S. recession along with the rest of the auto industry, reporting annual sales of $17.4 billion last year compared with $11.6 billion in 2009.
Closely held ZF makes clutches, axles and transmissions, including the fuel-efficient nine-speeds Fiat uses in its Jeep Cherokee SUVs and Chrysler 200 sedans. Its primary shareholder is the Zeppelin Foundation, started by airship pioneer Ferdinand von Zeppelin in 1908.
Defense contractor Northrop Grumman Corp. sold TRW to Blackstone Group LP for about $4.7 billion in a deal announced in late 2002. TRW went public in February 2004 and has more than tripled in value since then, data compiled by Bloomberg show.
ZF’s bid for TRW marks the biggest deal since ball-bearings maker Schaeffler AG tried to take over Continental in 2008 in a transaction resisted by the target’s board. The endeavor hit headwinds as stock markets tanked during the financial crisis and Schaeffler’s debt ballooned.
ZF CEO Sommer said the two deals are totally different in part because the push for TRW is “friendly, not hostile.”
| Product Model | Inside Diameter | Outside Diameter | Thickness |
| SA1-160 NTN | 160 | 230 | 105 |
| SA1-140 NTN | 140 | 210 | 90 |